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How can news outlets make money while giving news away free? “Long Tail” author provides a glimpse. 2/25/08

Posted by Steve Boriss in FreeNews, LongTail.
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Chris Anderson is not the author of “Freakonomics,” but you could say his upcoming book is about “freeconomics.” According to Advertising Age, his next book after his tech bestseller “The Long Tail” will be about how to make money by giving stuff away free on the web. Many are now trying to do just that with varying degrees of success, including Yahoo!’s email, Google’s search, Wikipedia, Craigslist, and various video and music downloading sites.

In an interview, Anderson describes three different business models for “free”: 1) the “razor/razorblade” model in which something that costs real money is given away, while cross-subsidized by another sale (e.g. razor/razorblade, printers/cartridges, TV programming/advertising); 2) the “no cost” model in which something with negligible costs is given away that provides indirect opportunities to generate revenue (e.g. free blog hosting or email storage to aggregate specific audiences for advertisers); and 3) the “gift economy” model in which content providers are motivated by non-monetary rewards, such as attention, reputation, or opportunities for creative expression.

What does this have to do with the future of news? Just about everything. First of all, news in its natural state is and has always been free. There is no limit to the number of people and organizations with stories they want told, and who would be more than happy to absorb the full costs of writing and producing it without the help of reporters. They include PR firms, ad agencies, publicists, think tanks, corporations, non-profits, government agencies, press offices, litigants, whistleblowers, and witnesses.

And second, the future of news will likely straddle all three of Anderson’s business models. Some news outlets will survive using the “razor/razorblade” model by giving news facts away for free, but adding something of value like opinion or creative style to attract subscription and advertising fees. Some outlets will survive using the “no cost” model by doing a superior job aggregating news for specific audiences for targeted exposure by advertisers. And, some will survive by spreading news without compensation, relying on other financial sources to pay their bills. Which leaves today’s reporters with three choices: be part of an organization with a news ax to grind, be a creative or opinionated writer, or be gone. They just won’t be free to be reporters.

Comments»

1. reuben - 2/26/08

Steve

You will not believe this. I was just sitting down to prepare a business plan for a hi-tech endeavor I will present to investors in March (a new kind of 4D Youtube) and I was wrestling with the issue of of how to explain evolving internet revenue models. I thought I would check your site before I began in order to clear my mind for that task and…can you believe it?! A concise summary of that very issue is waiting for me in your first post! Can you also cure malaria and balance my checkbook?

…And on the eighth day was created the Oracle at wi-fi.

2. Shafqat - 3/8/08

Great post! There’s a pretty controversial sentence hidden in there: “news in its natural state is and has always been free.” While I couldn’t agree more, a significant portion of journalists disagree vehemently with this attitude. They find that the value they add (editors, fact-checkers, ‘professional’ writers etc) should not be expected to be free for consumption. I always say that great content will always be in demand (perhaps via the razorblade model) – but the days where newspapers could charge for vanilla content of poor quality are over. I for one like the no-cost model – if you build a great community, the advertising dollars will come.

But what about news aggregation sites (Google News) – should they have access to news content for free?

3. Steve Boriss - 3/8/08

Shafqat, I believe that Google News is simply providing previews of minimal size that may or may not encourage viewers to visit the original source — not much different from a blog quoting or paraphrasing from an article and including a link. Moreover, now that Google has made a cash deal with the AP, which is owned by these newspapers, there seems to be little reason left for newspaper journalists to complain about it. However, I do very much believe in copyrights and incentives for people to produce material of value. So, for instance, I do not like the idea of Google placing entire libraries of copyrighted materials on the web that are not in the public domain without the permission of the authors.

4. » Blog Archive » A New Hartford Courant Faces The Same Problem. It’s Still A Newspaper - 9/28/08

[…] news business is still a viable and profitable venture. The newspaper business […]


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