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Friday, October 31, 2008

New Economy Business Models (Carr vs. Anderson)
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Somewhere between Nick Carr's "Typology of Network Strategies" and Chris Anderson's "Four Kinds of Free" is the secret to understanding our new economy:

Carr's "Typology of Network Strategies":

  1. Network effect

  2. Data mining

  3. Digital sharecropping, or "user-generated content"

  4. Complements

  5. Two-sided markets

  6. Economies of scale, economies of scope, and experience

Anderson's "Four Kinds of Free":

  1. Direct cross-subsidy (get one thing free, pay for another)

  2. Ad-supported (third-party subsidizes second party)

  3. "Freemium" (a few people subsidize everyone else)

  4. "Gift economy" (people give away things for non-monetary rewards)

Of course, both Carr and Anderson are building on theories and business models previously articulated by many others. A few that come to mind:

posted by Adam Thierer @ 10:46 AM | Books & Book Reviews , Economics

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Chris Anderson brings attention to the issues, which is great. But I usually end up disagreeing with his analysis. The long tail is not the result of a power law. This new free stuff is similarly sort of interesting, but leaves too many questions unanswered.

Here's an observation about advertising supported websites that almost everyone can agree with: Ads slow us down in using and digesting content. In order to be effective, they must.

What Anderson and others who share views like his don't adequately account for is the TIME we spend dealing with ads. There's a reason that offline media offers ad-free content (in the form of movies and books) along with ad-laden content (in the form of t.v. and magazines). Some people put a higher premium on their time. Others on their money. Time and money are not perfect substitutes.

Anyway Rupert Murdoch at least figured this out when he kept WSJ on a subscription model. Eventually others will follow.

Posted by: Michael F. Martin at November 2, 2008 11:35 AM

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