One of the most interesting and unique economic phenomenon
to emerge over the last 10 years is the impact of technology in creating
products that are free to the consumer. Chris Anderson writes about this in his
book entitled “Free”. The most unique aspect of this business model is that it
generates tremendous profits for those who know how to use it correctly.
Typically, the advent of a “free” product or service is a
sample that is intended to give consumers a taste that entices them to pay for
the products in the future. In truth, there is no such thing as free since
somebody must pay for everything. However, the rapid acceleration of technology
has enabled a business model centered around offering products, services, and
content that is free to the end consumer.
Let’s begin by examining the impact of technology as it
relates to delivering content and services. Moores Law postulates that the
number of transistors on an integrated circuit doubles every 18 months.
Practically speaking, this means that the cost per unit of computing power
effectively drops in half every 18 months. This means that the cost of
providing a product or service to an individual customer rapidly drops to very
near zero. Thus, companies who have already built out a technology
infrastructure can provide products and services at a very nominal cost. The
thing that enables this model is the freedom from content containers such as
books, DVD’s, phones, tablets, or some other device for holding or storing
content.
By specializing in software based technology products,
companies can capture all of the cost advantages offered by Moore’s Law without
being constrained by the cost of containers for their content.
In the end, this phenomenon of ‘free’ is continuing to shape
the online marketplace and is expected to produce the infrastructure for even
more new business models to emerge in the future. It represents a new paradigm
that will pose tremendous problems to people and companies entrenched in the
status quo and great opportunities to those who understand and leverage this
new business model.
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