"Free is more complicated than you think"

Peter Brantley sent a link to a great summary of Scott Adams’ nuanced discussion of the tradeoffs in making Dilbert freely available on the web. The punchline: “Free is more complicated than you think.”

Adams reports that putting Dilbert online for free

“gave a huge boost to the newspaper sales and licensing. The ad income was good too. Giving away the Dilbert comic for free continues to work well, although it cannibalizes my reprint book sales to some extent, and a fast-growing percentage of readers bypass the online ads with widgets, unauthorized RSS feeds and other workarounds.”

This sense of tradeoffs in making content freely available is consistent with our experience at O’Reilly. We find that making a book freely available can help visibility and sales of a book on a little-known topic, but for a well-known topic or author, who benefits little from the additional exposure (like Scott Adams), it can have a slight cannibalization effect on print sales. So, as a beginning science fiction author, Cory Doctorow used “free” to build his career, while Stephen King found the results of his experiments with free to be disappointing. (I explored these tradeoffs in my article Piracy is Progressive Taxation.)

The point is that we need more than one model. There is no one-size-fits-all answer. Advertising is a great model for people who can create or collect content that will generate sufficient traffic to pay for itself on the limited revenue per view provided by advertising. But that takes far more traffic than most people realize. Asking people to pay works well when the potential audience is smaller, and the cost of creating the content greater than can be recouped by advertising. But even then, you need to use “free” to some extent to make sure people find your content. If content is locked up too tightly, it drops out of the internet conversation. To this point note that above I linked to the free summary of the article on the Millions blog, not the original Wall Street Journal article by Adams, which is behind a paywall.

What’s more, as Adams notes, many users do prefer not to pay, even when they value the content they want to peruse. Even advertising is not immune to the leakage that comes as people want to access the content in the way that is most convenient to them. (Adams: “a fast-growing percentage of readers bypass the online ads.”) While many readers do realize that if they don’t pay in one way or another, the content provider may eventually go away, this tragedy of the commons is a distant future, not something that shapes daily behavior.

Adams describes his experiment with making his non-Dilbert books free:

A few years ago I tried an experiment where I put the entire text of my book, God’s Debris, on the Internet for free, after sales of the hard copy and its sequel, The Religion War slowed. My hope was that the people who liked the free e-book would buy the sequel. According to my fan mail, people loved the free book. I know they loved it because they emailed to ask when the sequel would also be available for free. For readers of my non-Dilbert books, I inadvertently set the market value for my work at zero. Oops.

So I’ve been watching with great interest as the band Radiohead pursues its experiment with pay-what-you-want downloads on the Internet. In the near term, the goodwill has inspired lots of people to pay. But I suspect many of them are placing a bet that paying a few bucks now will inspire all of their favorite bands to offer similar deals. That’s when the market value of music will approach zero.

I have faith that new business models will emerge — both creators and customers ultimately have incentives to make the transaction work — but there may be a rocky period where models that have worked for one type of content or another fail to do so. (For example, many of the computer book authors who used to make the StudioB mailing list a happening place no longer write books for a living. Instead, they write paid white papers for corporate customers.)

There’s another class of tradeoffs in a move to an advertising-based model for funding content creation: readers are expected to give up their privacy. Marc Hedlund wrote about this recently: Infiltrating the Privacy Movement.

This was the subject of a dinner conversation I had with Rupert Murdoch at the Web 2.0 Summit (before his on-stage appearance). We talked about the tradeoffs in making the Wall Street Journal free online. It’s quite clear to me that when Murdoch’s purchase of the Journal is completed, the paywall will come down. He sees the Journal readers as among the most valuable advertising targets in the world. But more than that, he sees a future in which he’ll be able to make those readers even more valuable by carefully and completely tracking what they actually read in the Journal.

These privacy tradeoffs are going to become even more widespread as advertising becomes the dominant model. How much would you let an advertiser know about you in exchange for their free content? How much would you pay to avoid having them know that about you?

As Scott Adams said, “Free is more complicated than you think.”

tags: ,