By Trent Mankelow

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We are often asked by clients for our opinion on the things they should watch out for, what the future holds, and who’s doing the really interesting stuff.

These kind of questions have inspired us to reflect, and collect our thoughts into four inter-related articles covering:

1. Devices
2. Social interactions
3. Services
4. Data

In this third part of a four part series, we are looking at services.

I was originally going to build on the last two articles and explore how clever companies are using new devices, and the social interactions they facilitate, to deliver new types of services.

But instead, I’ve decided to focus on one aspect - the large number of services that are given away for free.

Chris Anderson, the editor-in-chief of Wired magazine and author of The Long Tail, has recently written a book about this called Free: The Future of a Radical Price. Essentially, his argument is that the most effective price is no price at all.

The idea seems pretty radical, until you take a look around. Anderson quotes many examples, including Flickr, Google and Yahoo!, and New Zealand has plenty of our own. Our national betting agency, the TAB, give away Internet access for free. To launch their new house tracking service, Quotable Value gave away 220,000 reports for free (and tripled the number of people visiting their site as a result).

Unfortunately, many traditional businesses still don’t get this. In fact, some are going in the opposite direction.

News Corp, who publish many major newspapers around the world, have declared that the "era of a free-for-all in online news is over" and are going to start charging for content. For this to work, they accept that there could be a need for furious litigation to prevent stories and photographs being copied elsewhere. They will literally be taking their own customers to court. As Rupert Murdoch, the owner of News Corp, has said "We’ll be asserting our copyright at every point."

Thankfully, some publishers do get the "free" concept, like Thomson Reuters, whose President said "Blaming the new leaders or aggregators for disrupting the business of the old leaders, or saber-rattling and threatening to sue are not business strategies - they are personal therapy sessions. Go ask a music executive how well it works."

Free is getting to be normal. As consumers we are starting to expect it. But we are also starting to become resigned to the advertising that goes along with it. Advertising is a crucial part of many online business models. In fact, here in New Zealand we are getting off lightly - according to the IAB, 20% of advertising is "consumed online" but only 8% of the spend is online.

Now, this trend towards free isn’t universally applicable. People will pay if prices are low enough. For example, there were 200 million downloads in the first 102 days of the iTunes Apps Store, mostly of applications that cost a couple of dollars. Business Week predicts the app economy is worth US$1 billion today and will be $4 billion in 2012.

There have also been some criticisms of Anderson’s book. But I believe that businesses who are unwilling to accept the change to their business model, will find they quickly become irrelevant. If you are a bank: Mint.com will offer more insight to your customers than you do, and they won’t ever need to log in to online banking. If you are a sat-nav company: Google will offer sat-nav for free and your stock price will plummet.  If you are a publisher: You’ll charge for content and BBC won’t, and you’ll lose.

So what you can give away for free? As Tom Peters says - change now or risk becoming irrelevant.
 
In the next article we’ll cover Part IV: Data.