Keynote ses­sion at SXSW, with:

• Chris Ander­son — Wired Magazine
• Guy Kawasaki — Alltop

In 2006, Chris Ander­son intro­duced the con­cept of the Long Tail. His soon-to-be released book will talk about the power of free. Will his the­o­ries stand up to the tough ques­tions of ven­ture Sil­i­con Val­ley ven­ture cap­i­tal­ist Guy Kawasaki?

If you want to cre­ate a freemium prod­uct, where do you set the bar? You don’t want to crip­ple the ser­vice, but you don’t want to set the bar too high to the extent no one will feel com­pelled to sub­scribe to the pre­mium prod­uct? Twit­ter has crip­pled the prod­uct too much, to the point where it’s easy for Face­book to repli­cate the ser­vice and poten­tially catch up.

Free is the best way to max­i­mize your reach because it low­ers peo­ples’ bar­ri­ers to entry. Con­vert­ing 5% of a big num­ber is the busi­ness model of free. The mar­ginal cost of dis­trib­ut­ing a book is zero, so it should be free, since the opti­mal method of read­ing a book is still in paper.

Each one of us is our own plat­form and we each need to fig­ure out how to con­vert our rep­u­ta­tion and brand into money. That’s all of our jobs: build our audi­ence the right way and give them some­thing of value that keeps them there.

The prob­lem is that our pub­lish­ers are not mak­ing money from authors’ keynotes. For exam­ple, the music indus­try is per­fectly fine except for one part of it: dis­tri­b­u­tion and sale. The issue is, authors and musi­cians are now mis­aligned with their pub­lish­ers and record labels. The ques­tion is, can labels and pub­lish­ers rep­re­sent bands ade­quately in social media?

What if some­one fol­lows me and I send them a direct mes­sage with a link to a free pdf? Is this a good model? “My test for spam: if I do it, it’s clever mar­ket­ing. If some­one does it to me, it’s spam.” –Guy Kawasaki

The word “free” is one of the most mis­un­der­stood words. Free is a word that’s laden with mean­ing. And the mean­ing has changed over time. Twen­ti­eth Cen­tury free is where prod­ucts had a real cost, so you had to pay back the free quickly. Today, every­thing costs less to noth­ing, par­tic­u­larly dig­i­tal media. Freemium is the inver­sion of the free sam­ple model. Here, you give 95% of your prod­uct free and charge for 5%. Vir­tual worlds are exper­i­ment­ing with every pos­si­ble way to charge and 5% of the pop­u­la­tion seems to be a good model. But peo­ple mis­un­der­stand how hard it is to con­vert 5% of people.

China and Brazil are the future of “free”. We have the first true truly com­pet­i­tive mar­ket, which is one where mar­ginal costs are low. If you do not make your prod­uct for free, the mar­ket will do it for you by pirat­ing your stuff. Peo­ple then use piracy to cause celebrity, and celebrity to cre­ate cash.

Could Starbuck’s give away free cof­fee to attract and retain cus­tomers? Absolutely: it would be easy for them to do that.

The word free has a pow­er­ful meen­ing in eng­lish, where we take the best part of the words (ie., free­dom) and apply these asso­ci­a­tions to sell prod­ucts. Imag­ine a flag in your head which pops up every time you hear a price and it raises bar­ri­ers to you pur­chase. There is no cor­re­la­tion between free ad cheap. Util­ity comes first, price sec­ond. Peo­ple now expect two lev­els from almost prod­uct: a sim­ple, free ver­sion and a pre­mium version.

Are peo­ple more moti­vated by some­thing they lost, or by not get­ting some­thing they could? Things that you don’t have and want loom large; that ‘s what trad­tional mar­ket­ing has done. Some infor­ma­tion wants to be free and some wants to be expen­sive. You can have Guy for free on Twit­ter, or his cus­tomized ver­sion for thou­sands as a speaker.

On YouTube, the qual­ity of video is not as impor­tant as the rel­e­vance. Same thing with com­pa­nies: nowa­days, you can start a com­pany for almost no cost.

Open-source is free as in kit­tens: you have to look after them. A lot of the free stuff we have is because we sup­port it communally.