Free is just free of charge

In 1995, there was a period of time when I was so broke that I couldn’t afford to pay anything for anything. In those three weeks, I was desperate to find all the things you could do for free. There was hardly anything. There was TV, radio, the public library, galleries, and museums. Obviously you could walk through the city and the countryside. I think that was pretty much it.

Fast forward to today. Thanks to the Internet, I now have access to a huge variety of free services. Actually, the variety is not just huge, it is incredibly huge. And most of it is totally free. The major reason for this is that the Internet has made product distribution so cheap that companies can afford to give products away for free. People like Josh Kopelman have pointed out before that there is a huge difference between getting somebody to use something that costs $0 and $0.01. This is true. In a sense, you could say that the vast majority of newly launched online products are free these days. Personally, I ignore those that aren’t.

However, I find that I am now so inundated with free stuff that I don’t even find the time to check all these things out anymore, even when they are free. What this means is that these things don’t compete for my money anymore, they compete for my time.

So what I have realized is that these products are not free. They are just free of charge. But they cost me something: my time.

Thinking about it, time is the most important thing I have. After all, this is my life we are talking about here. Money, well, if you have it, money is just money. I will happily pay a fair amount of money for things that save me a great deal of time.

I think this has two implications. First, free products these days are not just competing for attention, but they are competing for time, or face time if you will. This has some pretty important implications for web start-ups, by the way. Second, I think users are realizing that they can do a lot of useful stuff with all these products, but they really don’t have the time to do it. I think this is giving rise to a number of paid-for services that help people save time or make things far more convenient for them.

A great example of this is TiVo. You essentially pay for viewing recorded free programs at a time you choose and without having to waste your time on adverts. Another example is toll roads. You can take the free road, it will take you forever. You pay for the toll road, because it saves you time and hassle. A specific software example would be Carbonite, the automatic back-up service. You don’t need to worry about and spending time on backing up data anymore; it just does it for you. Another example is skype. I use it free – a lot. But sometimes it is just awfully convenient to be able to skype-out somebody into a conference call, happy to pay for that.

So, my view has shifted. The standard, I now expect free of charge. (Well, with software and online services at least) But I am more than happy to pay for things that will save me time and make my life easier by offering me things that I couldn’t do before.

So, today, being broke doesn’t mean being bored. It just means being stressed. Amazing.

Measuring Engagement ROI

Today I saw in a news story that Microsoft is testing a new tool that is called ‘Engagement ROI’. This tool, developed by aQuantive’s Atlas unit, is supposed to measure the all the ways in which buyers interact with a company’s online adverts until the point when they eventually buy something. Basically, Microsoft says that focusing on clicks is not the whole story and the fact that website visitors are actually not clicking on ads doesn’t mean that adverts don’t work.

Ok. This is fascinating. Let’s take a step back and think this through. What do adverts actually do?

Let’s say, I am reading a magazine or watching TV. I will see 100s of ads in both instances. However, I only know a few types of ads that will spur me into action directly. Examples might be:

Special offers/discounts
Limit period products/promotions
Job adverts

Essentially, these are all the adverts that indicate that something is only available for a short period of time. The message is: this is a great deal, if you don’t act now, you will miss the window of opportunity. Dell’s computer adverts are a good example for this style of advertising. They constantly give you the feeling that if you don’t buy the computer now, you will loose out.

All other adverts, I ignore. Or do I? Certainly, they don’t spur me into action. But there is one thing that they do: they position a product in my mental map. This means a couple of things. It means that when I am actually looking for something, I might remember this product and consider it in my purchase decision or give it a higher consideration. If this product is positioned well, I might be prepared to pay more for the product than it is worth objectively. Also, once I have bought a more expensive product, I will also enjoy it more than if the product had been cheaper. Here is a good story about how the perception of price changes experience.

So, what does that mean? In the vast number of circumstances, advertising has the potential to:

Increase probability that user will buy a product
Increase price users are prepared to pay
Increases satisfaction with product, leading to more recommendations, and repeat sales of these products.

I guess what Microsoft is saying is that they want to measure these effects. This is, in theory, a very interesting idea.

So, here is the trick. I was in science a little while back. One thing that I remember very clearly is that when you are measuring an experiment, you need two sets of data. The data set of your experiment and a control data set. You draw conclusions based on the comparison of these two data sets. Ideally, you also have a positive control, so you know what the results look like, when the experiment works.

What I don’t understand is how Microsoft wants to establish the control data sets in these circumstances. I guess it is possible to figure out who has actually looked at which ads online. But how do you know who hasn’t? How do you measure overlap with offline advertising?

I am looking forward to seeing the answer later this year.

Marketing Obama Mariachi-Style

I saw this first on YouTube last Friday. Since then some 200,000 people have watched it.

I don’t know whether this works, but it is certainly an interesting attempt at winning over some of the Latin American voters in the US.

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