Not to rehash the debate over “free”, but the economics behind free underlies nearly every conversation and business decision today. Let’s focus on one small part of the debate.
The economics behind “freeconomics” blurs the distinction between “customer” and “user”; even though the user may not bear the cost, someone does. Companies that provide services to users for free still bear the marginal costs of the free services, therefore their business models are based on finding people and companies to subsidize the free services.
If the people subsidizing “free” go away (and that includes cash cow product lines, investors, venture capital, advertisers, paying users, buyers of aggregated and structured data, etc.), then what’s free right now may not be free in the future.
While the debate around “free” tends to center on the web, the web is merely one of many networks in use today. Take the examples of telecommunications (fixed and wireless), transportation (automobile, train et. al.) and energy networks: each network contains an embedded technological and economic structure that dictates the rules and incentives behind each interaction over the network.
But these networks aren’t static, and as each network becomes structurally more like the web their fundamental economics will change.
An example? Let’s start with the “mobile web”; Aaron Chua starts the discussion with Can Amazon be the default payment API for the Web? and I add in my comment:
Touching back to the piracy issue, is the [different economics behind the "regular" web and the mobile web] a failure of pricing mechanisms or is it a failure of distribution networks and transaction costs (including non-priced transaction costs)?
The digital economy isn’t forcing prices to zero; it’s forcing prices to their marginal costs. Marginal costs are higher in mobile (and virtual) at the moment because they have different pipes, different gatekeepers, different marketmakers, creators have substantially different access to the tools of production and distribution, low standardization of interfaces, etc. All of those create higher marginal costs, and combined with the “controlled” nature of mobile and virtual, there simply isn’t the same level of competition as in the non-mobile Internet… for now.
A day will come when the difference between the “mobile web” and the “real web” are framed less by the pipes and more by the access devices and their interfaces. Viewed more broadly, as innovation changes the structure of our networks, new technological possibilities and constraints will re-frame our economic structures, behavioral incentives, business opportunities and usage behavior.
Viewed simply, tomorrow will not be like today, tomorrow’s strategies will not be today’s, and what’s free today may not be free in the future.
And what’s expensive today may be free tomorrow: literally.
