Re:Beware of Freeconomics
by caudicus on Tuesday February 26, 2008 @06:24PM
(#124284)
Agreed - there's nothing really to "understand" here, as the grandparent called for. Businesses like Google are just doing what will maximize their profits. They aren't trying to be free or partaking in some "free!" revolution - they're just saying "Oh, ok, that will make us the most money, let's do it." It's a side effect rather than a goal.
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Well, not really - free is maximizing value creation, not value capture. Chris Anderson explained all this: "the world of free exists mostly to acquire these valuable assets [attention, reputation, etc] for the sake of a business model to be identified later"
It just so happens they already have a great business model, but they didn't when they released their search engine. They didn't make their search engine free to "maximize their profits"
I shouldn't have used "profits"...
I guess I'm thinking of what is called "Net Present Value"...which basically factors in short term losses for long term gains. Which kind of is what you're saying with "value creation" I guess.
In which case, yes, they decided to give away Google Search for free (as well as GMail) because they saw future revenue streams in another area.
My point is calling it "free" is BS in terms of NPV - which business decisions are all about, which valuation is all about, etc.