The Buzz Bin

Chris Anderson of WIRED!, The Long Tail and Free fame keynoted this morning’s GrowSmartBiz conference (Chris Anderson Image from PopTech!). He opened up the conference and dubbed it the golden age of small businesses.

The Long Tail

Anderson says The Long Tail acknowledges that mass market distribution has not met people’s needs, that their are tons of niche markets that want to be fulfilled.  The twentieth century got it wrong: We all watched Gilligan’s Island because it was the only show on.  Cable resolved us of the need to watch Gilligan’s Island. Point, Supply and Demand are not simple.  If we have diverse supply, demand for the mass distributed product dissipates.

In the twentieth century, shelf space became king.  Mass market companies paid for shelf space.  The Internet freed companies from having to pay for shelf space.  On the Internet, shelf space is free!!!

Market winners include small wineries, authors (Amazon), etc., etc. Small suppliers win, and now can stay true to their principles without having to pay for access to Wal-Mart!

Chris says he works in a big company, and he owns small companies.  Small companies are fast, cheap and nimble and can address small markets of $ millions. The scariest competitor today has two, three people with laptops moving at light speed!  Big companies cannot scale down to meet the threat.  At the same time, small cos have a hard time scaling up.

Little guys are winning the battle of scaling up first versus big companies who cannot seem to become nimble, move to meet the market. The moment a company can accept PayPal it can compete on a global scale.

Free

In 1896, the beginnings of Free began with consumer packaged goods at the general store. Gelatin was the start.  Jello kicked it off, then Gillette followed suit with razors at discount prices.

Giving away one thing in order to sell customers another thing is the core model of Free.  The loss leader is the 20th century precursor of Free. 

The 21st century version of Free is the digital free. It’s the economics of bits.  The difference?  The real Free is in the 21st century market.  Take Google’s more than 300 products, almost all of them are free.  These are monetized by advertising. One aspect of this is familiar, it’s the media model via radio, TV and newspapers (somewhat free).

Another model is the free scaled down version, versus the higher priced version. Think iPhone apps!

The beauty of Free and paid is customization and features. You know what you want, you understand the value, and you want to pay for it. People become happy to pay for the higher priced version.  Marketing/advertising is not needed to seduce a customer into buying.  Enticement is created by the free version.  The product sells itself by letting people use it. 

Freemium products are the future.  The challenge for business owners is figuring out what the paid product is.  How much do you put in, not put in?

Microsoft had a serious piracy problem in the 1990s with the Chinese.  They decided to allow it so that Microsoft was the software of choice, and by accelerating adoption, Microsoft will make more money!  Today, China is a huge marketplace for Microsoft. Count that as a win for Bill Gates.