Commercial: What freeconomics means for brand

Chris Anderson has done it again. After coining the previous neoligism du jour, ‘the long tail’, he has once more identified a tangible change in the emerging economy.

His article in this month’s Wired, ‘Free! Why $0.00 is the future of business’ is of course absurdly over-stated, and doesn’t – yet – apply fully to the wider economy. It has attracted opprobrium already, most slyly at AdLab who have pointed out the similarities between what Anderson is saying and communism.

(In passing, Anderson is also the first person to try, in a more accessible way, to integrate theories of the gift economy and the economics of attention into wider mainstream business thinking. Expect to see these two terms increase in prominence in the next few years.)

But in the areas where digitisation is a fact of life – software, music, media etc – the case is persuasive. ‘Free’ in these economies means that marginal cost has fallen to an effective zero. At this point, at the minimum, new business models (in the main, yet to be defined) will start to kick in.

What does this all mean for branding and advertising? Lots:

1. Anderson argues: “Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads).” So reputation matters. Which means brand matters. (The more you are heard of, the more people are likely to link to you, and hence you are likely to rise in PageRank.) And brand is another way of saying reputation.

2. How are people going to hear about you? Well, through advertising (as Anderson says, “In a sense, what the Web represents is the extension of the media business model to industries of all sorts.”) It just won’t look like advertising. Messages will be delivered in mass and personalised media, through existing and new channels, both big, lowest common denominator messages, and highly targeted, directed messages that are only relevant to you. As a brand owner, you’ll need to use every tool at your disposal.

3. As things move towards being ‘free’, you as a brand owner will make money through the premium that your brand will allow you to charge. This will be based on the quality of the product and service you provide and/or the emotional reaction your brand causes.

Which is obvious. More directly, to charge a premium, a brand will have to get better at doing customer service, developing sustainable products, building personalised, intangible services (the branded utility, as Anomaly christened it), and providing customers with unexpected delight.

Do all that, and a brand might be rewarded with loyalty. And you have to keep doing it, again and again and again. As a ‘free’ economy also means that, in part, barriers to entry in your industry are likely falling too – which means more competition.

And yes, the cost of building, developing and launching a brand should fall too. Which should cause some worry here, here, here and here.