The third party will pick up the tab

In Chris Anderson's 2004 article The Long Tail (Wired) he talks about three rules for entertainment business success on the Internet:

1. make everything available
2. cut the price and
3. help consumers find what they want.

His article describes how aggregating the long tail of niche markets is where the money is - an idea which he expands in his book The Long Tail: Why the Future of Business is Selling Less of More published in 2006.

Chris' article was groundbreaking for me as I always thought that across-the-board profit was generated through the popular-blockbuster staples which naturally sidelined subcultural, artistic and unusual products. It was relieving to learn that through individuality there is market power and that the Internet flips the traditional market mechanism through its capacity and distribution powers.

Because I wanted to know more, I looked at Chris' blog, also called The Long Tail, and found other ideas he has. Currently, he is talking most about the concept of "Free" (Video 3:19). In his Wired article earlier this year, Free! Why $0.00 Is the Future of Business, Chris outlines that providing products for free is the new Internet economy, all the winners do it (Google, Yahoo!, Amazon etc.) and the benefits are enormous.

The benefits, as he puts it, are "a three way market. Here a third party pays to participate in a market created by a free exchange between the first two parties."

He points out that we are already familiar with this experience by describing the traditional media market where radio and television are free to air and paid for by advertising. He also highlights that newspapers rely on advertising to cover their costs of print and distribution so that the high prices are not passed on to the consumer.

He admits that advertisers will not pay for everything but describes ways to make money from providing products for free: "selling information about consumers to brand licensing, 'value-added' subscriptions, and direct ecommerce (see How-To Wiki for a complete list)."

In July this year Chris' book about this topic was published. Unsurprisingly, Free: the Future of a Radical Price is available at no cost in electronic and audio format. There is also the option to purchase the physical copy as well.