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Live from SXSW: The closing keynote

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Marketing Strategy

The closing keynote at SXSWi ‘09 was a spirited interview of Wired Editor-in-Chief and “free” advocate Chris Anderson by “all about the investment” venture capitalist Guy Kawasaki. Guy led with the tough questions and saved the softballs for later. Here’s a paraphrased version of their back and forth, SmartBriefed for you:

GUY: In terms of a revenue model, what should Twitter do?
CHRIS: Inserting advertising into Twitter would be culturally discordant, and charging individual Twitter users is a non-starter. However, if a company wants to have a social voice and uses Twitter to raise its visibility, they could be charged for that. Entities like you, Guy who use Twitter as “a marketing weapon” probably wouldn’t even care the price. (Guy agreed.)

If you could reinvent Wired, what would you do?
Paper still matters. But in a digital form, production costs are far less. Giving away content for free in some form, then, is a viable option. Lowering the barrier of entry for readers is the best way to maximize reach. Instead of the 20th century model of “free” whereby companies gave away 5% to sell 95%, I advocate the real free: giving away 95% to sell 5%. It’s the “freemium” idea. If you can convert 5% of your users to pay, that’s a model that works. That old quote that “information wants to be free” isn’t entirely true. Some information wants to be free, while other information wants to be expensive. There is a demand for customized versions of publications, products and services that save people time or money.  And that is worth paying for.

What can we learn from China, which has no digital rights management?
Use piracy to create celebrity and celebrity to create cash. Free is all over the marketplace in China. Think pirated CDs and knock-off Louis Vuitton. The mass popularity that accompanies “free” creates more demand for the luxury items. Ah, the irony of the Chinese teaching us capitalism!

Which is harder, to achieve popularity or to monetize it?

Monetizing it — definitely. Each one of us has to have our own platform to convert our reputation to money. We all want to sell ourselves, right? (Guy’s rejoinder: “You can sell out, I just want to rent.”)

What if Starbucks gave away coffee for free to bring people to the store and upsell them? Could “free” work for an analog model?
Absolutely. One look at Wall Drugs who started giving free ice water away decades ago and is still thriving today tells you that it already works.

Why is free so much more compelling than charging a penny?
The psychology of free cannot be underestimated. This is known as “The Penny Gap,” and it’s the curse of micropayments. If something costs even just a penny, it raises a flag. Consumers ask: Is it worth the price? Will I use it? Will I value it? Free never raises that flag. It’s not about the money, it’s about the flag.

For this upcoming generation is there any scenario where kids will pay for content?
Yes. People are willing to pay for superior quality or convenience. If it’s easier and saves time, they’ll pay because time is money.

Is there any scenario where free is not good and cheap is good?
In my opinion, no. There is no excuse for sucking. If your product/service sucks, users will go elsewhere and stop talking about you.

Are people more motivated by losing something they have or not getting something they could?
People are more motivated by the negative than they are by the positive. If something is free they’ll be willing to try it. If it’s valuable to them and they are totally engaged with the product/service, when it’s time to pay, people will do so without regret.

Photo credit, Gillat