Chinwagging about FreeConomics

Last night was the Chinwag FreeConomics session, on the panel were:

Nic Brisbourne - Partner, DFJ Esprit (Chair and impromptu panel member)

Azeem Azhar - Managing Partner, Open Capital Partners

Bruce Daisley - Industry Leader, YouTube

Victor Keegan - Technology Columnist, Guardian

Charlie Blake Thomas - Commercial Director, Huddle

Alan Patrick (me) - Co founder, Broadsight

Kudos to Chinwag's Julia Eilon for putting it together, Sam Michel & Emily Fisherfor putting it on (and the free* beer )

Now my stuff you are all familiar with (see here, here and here if not) so this is a brief summary of the Other's Stuff - I couldn't take a lot of notes so they are highlights of each person's comments (or approximate - my notes are a bit scrabbled) and some of the questions:

Nic Brisbourne has written up his thoughts over here, key thoughts are that, as Nic says:

"the most interesting/surprising thing to come out of the discussion was a much greater degree of willingness to start paying for services than I had expected. A lot of that was couched in terms of ‘if there was no free alternative I would pay’ which of course begs a very large question, but it will be intertesting to see what happens when people are actually asked to start paying, because I think they will be. Subsidies from VCs and large corporates are drying up, if they haven’t run out already, and despite the fears of what it might do to their businesses I expect many companies to start experimenting with charging more aggressively."

Azeem Azhar made the points that:

- Free has allowed innovation - opensource is perhaps the most powerful example of this. Huge benefits have accrued from free to user services

- there are no longer extreme profits to be made from the areas Open Source touches, as they will be competed away by "teenagers in backrooms".

Azeem also asked if there was anyone in the room under 23 who has essentially always lived on the FreeNet, I think only Phil Bradley was

Bruce Dailey said that YouTube costs! 10% of broadb
and's bandwidth is YouTuve video. Bruce made the point though that Google strongly believed YouTube was worth funding while it experimented with finding its best business model, and that they are working on a number of ways of optimising advertising models for it. There will be a lot more focus on targeting (and data analysis) in future

Victor Keegan - when talking about payments on the 'Net, he noted that people are conditioned to "free" - they will pay £3.50 for a ring tone and pennies for an SMS whereas expect the @net to deliver 25,000 word essays and more for free. Talking about getting used to "Free" services, he noted that when Google et al fail, then there is no recourse - so people will pay for quality of service, security and ease of use once they are aware of how disruptive the "free fail" is.

Charlie Blake Thomas - Huddle essentially uses free services to minimise barriers to entry to its starter project management services, but then charges money for its high level services. He made a point we would agree with, that one should build a freemium service with that objective in mind, as it would be very hard to convert from free to freemium later. Also, as he noted, using Google as an Ad model often leads to issues as people don't get that:

Google really isn't a service for us, the searchers, but actually for advertisers, where it gets its revenue from, we're just the middlemen, acting as a muse.

i.e. if you are trying to serve customers, not advertisers, this model is not likely to be the right one.

As far as the questions went, here are my thoughts:
(i) I honestly thought that FreeConomics as a concept had been killed off by its innate economic irrationality and The Crunch, but last night I realised the "propaganda" around the meme, and its sheer attractiveness, meant that it has spread far and wide and is still believed - or at least people's cognitive biasses are very friendly to it. The lesson here is that wrong but attractive ideas with access to large scale media distribution can go a long way.

(ii) There were a lot of questions about print media's future, among them "mergers are bad", "will micropayments work", "will it own end devices, eg Kindle" and "can it survive". My views are:

- mergers in Old Media are inevitable, it happens in all declining industries
- micropayments won't work - transaction costs are higher than any one newspaper - subscription to valuable hard to get metacontent (archives, special reports etc) will work
- it won't own end devices, more likley it will have aggregated subscription models
- it will survive, but after c 3 years of "creative destruction" and it won't look the same

The Huffingtom Post taking on investigative reporting isinteresting - a year ago peopel were saying that all the money is in the fluff and classifieds, but as anyone can do this its becoming clear that valuable news is a differentiator.

(iii) Free and Social Media - can these services survive as at present? My view - no, the lesson is the chat groups that have been going for 10 years or so that have "Freemium" services - pay money, get better access to other people's data.

(iv) Does Freeconomics have the seeds of its own destruction (from Ben Ellis)? My view - yes, a once one player has gone free all the others will, thus competing away any advantage and removing any economic surplus.

(v) Will Ads save Web 2.0 as Free dies - my view - yes, but eventually - clearly more Ad revenue will go online over time, but the rate of value destruction of current Ad supported businesses is faster than the rate of increase opf new businenesses - see (ii) above

Other Blog Posts

- Dan Leahul, Brand Republic

- Abigail Harrison, The Blue Door

- Lisa Harris, Punching above your weight

I'll add more as I see them come up.

*nothing is free, of course - we sang for our supper and the audience funded it. Here endeth the real lesson of FreeConomics