Beware of Freeconomics, Alex Iskold explained why the 'free' economy proposed by Wired's Chris Anderson may not be a bed of roses. Commenter SJones had an interesting 'bee' metaphor that furthered the discussion. "It is not enough to build a killer app", said SJones, "they [startups] have to build a killer honey pot." Read on to find out what that means! We love a good metaphor here at RWW, so congratulations SJones, you've won a $30 Amazon voucher - courtesy of our competition sponsors AdaptiveBlue and their Amazon WishList Widget.In our post
"[...] I disagree that Google got into GMail just to undercut, say, Outlook/Exchange. They profit from "free" email both by directly placing ads and by using the links and keywords in email to boost the effectiveness of their bread-and-butter search. So, their "free" email service buys them page views, a huge marketing channel and rich metadata that keeps them way ahead in search.
Likewise, Flickr/Yahoo gives away free image space to attract 1) a huge community to which they can market stuff, 2) a massive volume of page views (i.e. ad revenue) based on user-generated content, and 3) a fantastic pool of tagged images that Yahoo can serve as search results.
In this freeconomics world, startups still have a chance because startup costs are rock-bottom low. However, it is not enough to build a "killer app". They have to build a "killer honey pot" that uniquely attracts workers/customers that generate the content that both attracts page view "honey" and (virally) more workers/customers.
Is this bad or complex? Not really, just a different skillset. In this "honey pot" world, effective social architecture is more important than sheer quantity of application features. You don't charge (or charge much) for the "application." Instead, you harvest value out of the content/attention of your worker-bee customers."
bee image: bbum