The Emerging World of Free
Chris Anderson, author of the Long Tail, talks about the premises underlying his new book "The Emerging World of Free" in this must-see video (h/t to Guy Kawasaki).
Real estate professionals collectively fret over the erosion of their income as they realize how much closer to "free" their services are becoming. Anderson explains that this is simply the manifestation from a business model paradigm based on gatekeepers using scarcity of knowledge as a value proposition to one where knowledge becomes free on the internet.
| Examples | Scarcity paradigm - knowledge, content are controlled by a scarce few | Abundance paradigm - knowledge and content are distributed by the masses |
| Manifestation | Gatekeepers uphold scarcity and charge their "arm and leg" for it | Knowledge becomes free because there is little marginal cost to posting said knowledge on the internet |
| Example - Mass media | 20th Century model - broadcast media - infinite reach but limited channels. | 21st Century model - internet - infinite reach with infinite channels |
| Consequence of broadcast media | Tastes are
controlled by a select few producers. Content is broadcast to the
lowest common denominator or culture, hence most TV sitcoms and films
may be likeable, but are generally insipid. | User generated content is unfiltered and mirrors infinite tastes and cultures |
| "Freemium" free samples | Free samples
(i.e., perfume or 4 free copies of Forbes) amounting to 1% of the
product costs are given away in order to close on the purchase of
product. | On the internet,
the marginal costs of providing knowledge and content are approaching
zero, so it is given away free to 99% of consumers in order to attract
the 1% that will purchase the premium product. |
| Cost of 1gb of storage | At the introduction of Hotmail in 1996, 1 gigabyte of storage was $100. Storage was scarce. | Gmail introduced
1gb storage in 2005 when all other webmail services were only offering
2mb storage. Now, Gmail and Yahoo! offer infinite storage at roughly
$.40/gb cost |
Here are a few premises made by Anderson and their applications to real estate:
"Anything technology touches, the marginal cost tends to fall to zero".
The classic retort is "how can anyone make money if everything is free?"
"Knowledge wants to be free but it also wants to be very expensive."
In other words, commodity knowledge - Zestimates,
the steps to buying a house, mortgage products - is free on the
internet but customized knowledge - the experience and professional
market monitoring of the Realtor is the value add.
(example: Prince will give away free CDs of his music because he's really in the concert business - he charged over $1,600 per ticket for a performance that was named the #1 musical event of 2007 by an LA Times critic. His time is scarce and he wants to be compensated for it at a high hourly rate. Which validates the next premise...)
(example: Prince will give away free CDs of his music because he's really in the concert business - he charged over $1,600 per ticket for a performance that was named the #1 musical event of 2007 by an LA Times critic. His time is scarce and he wants to be compensated for it at a high hourly rate. Which validates the next premise...)
"Every abundance creates a scarcity" - and that scarcity creates value
The
old real estate marketing paradigm relies mostly on cultivating a
referral network based on the concept that "you were trusted before".
The new paradigm is based on exactly the same principle of being
trusted but demonstrating and proving that trust by providing your
abundant knowledge freely online.
Simply
put, blogging and participating in social media allows real estate
professionals to position themselves with their consumer clients two
ways:
- The Attention Economy - since most potential clients are online, agents need to compete for their attention online. A website just doesn't do that; a blog that provides updated information and data that a client wants does. And a blog creates the traffic and search engine ranking profiles that generate leads from outside an agent's traditional circle.
- The Reputation Economy - agents need to hyper-build their referral networks with Web 2.0 tools like blogs and social networks to create a strong online reputation. After all, if commissions are shrinking, the most successful agents will grow their referral networks to compensate.
Once again... a great article. Companies need to publish and distribute expertise freely in order to build trust and get leads. If you have experts on staff... prove it. Check out "A Relationship Economy" for some good stuff on social media http://jayderagon.com/blog/ ...
Reply to this
Thanks for the link Carson, the Relationship Economy is a fine read...
Real Estate Remix is a unique site for marketing ideas... just great!
Reply to this
Excellent post, and thanks for the thought and summarization. I can take this and apply it to what I'm doing now, in a radically different market, by conventional definitions, but one with a lot of similarities in terms of reputation and attention economy terms.
Reply to this
As counter-intuitive it seems, I think you've hit the nail squarely on the head with this concept. And you've explained it very well.
Reply to this
I aqree that this stuff seems counter intuitive and in many ways its execution can be futile. Eban Pegan (an ex real estate industry guy) calls it the free line. He just renamed it from a Jay Abraham concept called Strategies of Preeminence. Whatever you want to call it...but just to give stuff away will make you have less stuff.
There are right ways and wrong ways.
As an example we are offering 30 days free trial on our services. However, it goes into a forced continuity. Without the forced continuity most just dropped off making us a very generous charity.
In the examples that Anderson mentions they give away real value for real return. They are not just giving stuff away for the hell of it.
By the way many question Andersons original Long Tail paradigm as it doesn't always quite translate to many businesses and especially SEO where most see this as a replacement for expensive SEO servies. But I digress.
For every Youtube that offers free Video hosting, there are hundreds that will never get a Google to buy them out. They are relegated to lame Adsense revenues and other CPA network deals that will never satisfy their internet dreams.
Reply to this
Chris Anderson's positions always attract polar perspectives. The Long Tail has been confirmed and refuted, but the concept remains powerful. Similarly, Free makes sense if it's spun the right way.
I go way back to Wall Street's Random Walk theory that posits all stock prices are priced "correctly" given all historical information on that stock up to that point in time, and therefore impossible to predict in the future. It's fairly easy to refute, but it remains a powerful, albeit arcane economic theory.
Reply to this
Excellent post and thanks for the thought and summarization. I can take this and apply it to what I'm doing now, in a radically different market, by conventional definitions, but one with a lot of similarities in terms of reputation and attention economy terms.
Reply to this