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Quick Summary: In today’s attention-scarce economy, where freebies have become the cost of entry, enterprises need to strike the right balance between giving away freebies to get attention and retaining the ability to eventually monetize the attention.

This post was inspired by a thought-provoking post by Piers Fawkes on free versus paid social networks (via Valeria Maltoni). Piers compares his experiences with a not-for-profit (Likemind) and a for-profit (The Purple List) social network and concludes that –

To leverage the opportunities that digital connectivity has fueled a company should be a 50/50 corporation. 50% about being social, 50% about making profit.

In our attention-scarce economy, consumers demand freebies in exchange for their attention. Enterprises give away freebies in the form of free content, or, in some cases, even free products, in the hope that they will get their customers’ attention, build lock-in, and eventually charge for value-added services. In an earlier post, I have called this trade-off the economics of free –

Therefore, Piers’ idea of the 50/50 Enterprise itself is not new. What is new is his insight that unless you decide upfront, and let your customers know upfront, that your enterprise has both free and paid elements, you may not be able to charge for the paid elements.

Quick Summary: Read about how Nike is helping customers create their own cultural currency with Nike+.

The Economics of Free

In an earlier post, I wrote about the ‘economics of free’ —

Free content -> Attention -> Free product -> Lock-in -> Paid bundled services -> $$$

The ‘Free content -> Free product -> Paid bundled services’ model is an extreme example of a trend we have been seeing for a while now — marketers bundling services with basically undifferentiated products in order to build a differentiation.

Free Content Can Convert Brands Into Cultural Currency

Take Nike as an example.

In spite of all the technology that supposedly goes inside a typical sports shoe, if you take away the logos, it’s almost impossible to differentiate between a Nike, a Reebok and an Adidas (or Puma or New Balance or…) shoe. So, Nike/ Reebok/ Adidas have instead focused on differentiating themselves by converting their brands into cultural currency. We have started talking about marketers becoming publishers and using free content to grab attention only now, but Nike/ Reebok/ Adidas have been doing it for decades. What’s more, it has worked out brilliantly for the sports shoe industry — even non-athletic types like yours truly have four pair of sports shoes — one for jogging, one for trekking, one for cross-training and one for tennis.