Free – the new internet business model and marketing….

Have just re-read this article about internet business models by Chris Anderson of Wired magazine fame.

His argument is that the declining cost of technology, and therefore information storage and distribution, means that costs for growing internet companies will decline rapidly towards zero. This means that businesses can evolve from cross subsidy business models (e.g. Pay for a mobile phone contract, get the handset free) to a model where the whole product is totally free and the company makes money in other ways. An obvious example, Google’s products are free, and they make their money by selling access to consumer information to other businesses for advertising and other purposes.

The ease and low cost of distributing information also creates a contradiction with regard to the value of information. On the one hand some information is valuable and so therefore it can be charged for if access to it is controlled. But on the other hand valuable information is hard to control, in the sense that it is one of the things that we most want to share with one another. In a way the information wants to be distributed. It wants to be free. Richard Dawkins described this type of information or idea as a “meme” (in his book The Selfish Gene).

This contradiction helps us understand the challenges to the traditional media’s business model, especially print media like the newspaper industry. In the past it was easy to control the distribution of information and charge for it, because you had to collect it all up and print it into some easy to distribute format (like a newspaper or, for that matter, a book or even a CD). But when the cost of distributing the information is close to zero, and the information is valuable there is little that can stop it being shared, something of which the music industry is all too aware.

Martin Sorrell recently bemoaned the failure of the newspaper industry to translate print revenues into digital revenues by charging for newspaper online versions. But this is a fundamental misunderstanding. Digitising the information means setting it free, and if it is free then it can’t generate revenue (at least directly). Subscription models don’t work because consumers understand this dynamic, not because they haven’t been trained up to pay as Sorrell seems to be suggesting.

In any case the newspaper industry has only ever derived part of its income from charging for content, and has been an advertising business for many years. As a result consumers aren’t really used to paying for the information in a newspaper anyway. I pay 2 quid for a Sunday paper because I appreciate the convenience and experience of the format – In a way I am paying for the printed paper, I am not paying for the information itself because I realise the vast cost of collating the information is covered by advertising revenue. I am not prepared to pay for the online version although it is the same content, because the format doesn’t offer me the same benefits as the printed version and because I understand that is funded by advertising revenue and low cost to distribute anyway.

So the issue is really that newspapers have not figured out how to become internet advertising businesses and how to cope with the fragmentation of that media and the new rules that apply. It is their attempts to translate display advertising models online that hasn’t worked and these approaches have under-utilised the potential of internet advertising.

So what are the implications for other marketers?

Well as most marketers know, the good news is that if you can create marketing messages that engage and resonate with consumers, messages that are valuable information, then there are lots of low cost ways for that “meme” to be shared.

The other good news, is that marketing no longer needs to just be the dirty commercial stuff that makes mass media cheap or free to consume and that distinction is declining in importance. Consumers don’t really need to distinguish between where an idea came from or who created it, just which ones are valuable and worth sharing. That means that there is no reason in theory why a commercial message that is sufficiently engaging, entertaining and valuable shouldn’t be as widely shared as a piece of content produced by a traditional media company.

This fact isn’t really that new, in the old days the classic cliché was that the TV ads where better than the programmes (well some of them). The difference is now that if your marketing isn’t as good as the programmes, then its ability to engage is going to decline in inverse proportion to consumer’s ability to share ideas that are engaging and edit out and ignore ideas that aren’t. When everything is content, and consumers can freely share it, or not share it, it is going to be tough for the brands that have no idea how to create it.

The blurring of traditional marketing boundaries …

The US band Presidents of the United States have come up with an interesting way of launching their latest album, instead of buying a CD or downloading the album, they are launching an app for the iphone. It gives them a couple of benefits over traditional downloads, like a more constant connection to their fans, and allows them to serve up their catalogue as well as the new music.

If you think about this from a marketing perspective, it is hard to describe what they are doing with our usual terminology. Is this digital marketing? Or does this count as a new distribution model for their product? Or is it the product itself? Or is it a service? Or is it all of these? Ultimately it doesn’t really matter as far as the Presidents of the United States are concerned, they are trying something new and interesting and will reap the benefits.

For marketers I think the lesson is an important one – traditional boundaries and definitions are no longer clear. A TV ad can be content (e.g. Cadbury’s Gorilla), content can be a TV ad (e.g. Sony’s placement in Quantum of Solace), products can be marketing (e.g. music album releases that promote the live tour) and marketing campaigns can be a products (e.g. free gigs from a mobile operator). This means that you can’t judge what will engage and cut through by the normal standards either.

Consumers will just engage with whatever is interesting regardless of where they come across it or its intended purpose. So brands must just do interesting things that excite consumers and worry about definitions and boundaries afterwards……

The concept of flow in the creative process…..

In this fascinating talk from the TED conferences last year, Mihaly Csikszentmihalyi talks about the creative process and describes the ideal state for maximal creative productivity.

It seems really right to me that your mental state when engaged in any sort of creative work should be a function of the difficultly and the skills you have to overcome that difficulty. It also seems right that the most rewarding state is a balance between the two, work that is either too difficult or too easy can be respectively frustrating or boring. It also seems to me to apply to all types of work where one starts with a metaphorical blank sheet of paper, not just creative work in the narrow sense.

I think that this description might also apply to working in teams of people. We all know that feeling when a team is working really well together, at the height of its powers vs a team which is struggling to cope with the challenges in front of it.

In either context this is a valuable principle to live by, and if we maximise flow in our professional and personal lives then we stand a good chance of fulfilling our potential……