Free Products Can Produce Profits

Making Money by Giving Your Product Away

Free Products Can Produce Profits

Image courtesy of [phanlop88] / FreeDigitalPhotos.net

I was reading Cory Vanderpool’s article, prompted by an article in The Atlantic about how the Grateful Dead discoveredinnovative marketing secrets almost 40 years before they became mainstream, and I wanted to add some of my own thoughts about one marketing method that is hotly contested today: giving away content and making money off of ancillary items.

While some large organizations, such as the mainstream music and publishing industries, continue to sue their most loyal customers, the Dead were one of the first to realize that huge sums of money could be made if you simply cater to your core audience and give them what they want.

From The Atlantic article: They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.

The story also points to something that John Perry Barlow, Dead lyricist and founding member of the Electronic Frontier Foundation, wrote for Wired magazine in 1994.  The concept, which goes directly against traditional business models, is based on the notion that it is not scarcity that creates value: “in the information economy, the best way to raise demand for your product is to give it away. What people today are beginning to realize is what became obvious to us back thenthe important correlation is the one between familiarity and value, not scarcity and value.”Anyone who is interested in subjects such as these would be well-served by paying attention to certain articles and podcasts by Cory Doctorow, a science fiction writer and founder of the very popular BoingBoing.net blog.

In his collection of essays, Content, Mr. Doctorow explains how he convinced the publisher of his science fiction book, Down and Out in the Magic Kingdom, to let him post the entire text of his book under a creative commons license. Anyone who downloads the book is free to read, distribute and copy the book, and are encouraged to use the text to create derivative works.

Mr. Doctorow explains how some people buy the physical version of the book, while others download the free version. Many who download the free version never intend on buying the book anyway, but many others do end up buying the real book, either as a way to support the author, or because they like reading books in their traditional form.

The most important thing for a writer, Doctorow explains, is to get his name out there, far and wide, and people who like his book will send it to their friends and/or create derivative works, and this gets his name and writing distributed much further than traditional publishing could do. This ultimately translates into money in his pocket, directly through book sales, and through other methods, such as speaking engagements. His sales records are additional proof that this method works.

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