Chris Anderson on Google vs. Microsoft in the 'Free' economy

TechFlash reports: Wired magazine editor Chris Anderson, author of "The Long Tail," is in the Seattle region to promote his new book, "Free." He spoke yesterday at Amazon.com and he's at Microsoft this afternoon.

After speaking this morning at a Greater Seattle Chamber of Commerce event, Anderson sat down with us to talk about his book. Despite the title, Anderson doesn't contend that everything should be free. But he observes that more things are becoming free as companies find ways to make money on premium offerings on the fringes of the free stuff -- the "freemium" model, as it's known.

Anderson's thesis has been made all the more timely by Google's plans to launch its free Chrome OS next year, supporting its primary advertising business and potentially competing with Microsoft Windows. We started by asking him for his take on that development.

Q: You write at length about Microsoft in the book.

Anderson: Competing with free, yeah.

Q: Exactly, and there was this epic example of this last week when Google announced plans for the Chrome OS.

Anderson: And when Microsoft announced free (web-based) Office 2010.

Q: Right. As you see that competition between Google and Microsoft unfolding, as it relates to this concept of free and "freemium," who do you see ultimately winning?

Anderson: Well, the consumer, for starters. You know, I struggle with words like "win." It suggests there's kind of a zero-sum game. I think there's more than one market. It's not the desktop computer age anymore. It's not like winner-take-all on the desktop. I think there's obviously a place for different kinds of computing, different operating systems.

Q: Maybe a better way to ask that question would have been, in this new world, is there a place still for traditional operating systems and productivity software that you sell for $250?

Absolutely. As I point out in the chapter on how Microsoft competed with free, what they have found is that you can compete with free. You're not selling software. What you're selling is something else. Convenience, risk-reduction, peace of mind, a contractual promise. You're selling something that people value.

You know, why do people buy music when you can download it for free? Why does iTunes exist. Because it's easier and safer and faster, not really because people feel some sort of moral obligation to pay for music. Ninety-nine cents doesn't matter as much as one-click simplicity. So they're not selling music. They're selling simplicity.

Q: Are you putting a value judgment on this "free" trend you're observing? Is it good or bad?

Anderson: I'm amoral. I just don't believe I know what's good or bad. Even if I did have my own definition, I don't believe that definition should be universal. I don't project my values on anybody else. I try to describe what we're seeing already happening. I'm not a big one for manifestos about what should happen. I do it occasionally, it's kind of in the Wired DNA, but it isn't my natural voice.

I think history will show what of this turned out to be positive and what turned out to be negative. I think you'll see both. The Internet clearly has winners and losers, the Internet has many positives, and it also is a platform for division and polarization and bad behavior. It would be probably wrong to even speculate in advance whether this is a net positive or a net negative.

Q: My sense, as someone who covers the technology industry, is that with the Long Tail you were crystallizing something that was happening but that most people might not have really observed. With Free, it was in 2006 that a reader of Fred Wilson's blog coined the term "freemium."

Anderson: Actually it was one of his entrepreneurs.

Q: Are you far enough out ahead of the curve with this one to really get the attention that you did with the Long Tail?

Anderson: So, I coined the "long tail." I didn't coin "free." I didn't invent the long tail phenomenon, the Internet did -- Jeff Bezos and many others a decade before -- but I coined the phrase and in some sense I crystallized it. With "Free," I certainly have not done that, nor have I attempted that.

You know, I would say that the book "Free" was not driven by the need to convince people that there was such a thing as free. It was more driven by the fact that there was a lack of a taxonomy and an economic model to explain what already existed. It's very much rear-view mirror stuff, but it struck me as freaky that there was not only no book but no body of work that explained, at least in ways that the average person could understand how this thing happened -- that the Internet became a country-sized economy the price of zero.

Am I far enough ahead? I think some would say that I'm too far ahead, that it's Utopian and wrong. I think it's probably just the opposite. In some sense it's not enough far ahead in that my core audience -- Internet people, if you will -- don't disagree with a word in it, they're just looking for tactical advice beyond what's in the pages of the book. To them, I'd say, blog. Hopefully I've started a conversation that will generate that tactical advice, but I don't think "free" is controversial in my world, and I certainly would not expect to be ground zero for "free" the way I was ground zero for "Long Tail."

Q: The casual game industry is very big here, and in some ways it's a prototype for what you're talking about. Have they perfected the model?

Anderson: Well, there is no model. Is it iPhone apps? Is it Flash games? Is it all web-based, is it downloadable, are we talking about gaming platforms or just on the web? Are they ad-driven, are they freemium model, are they tip jars? There's so many different approaches to this, and I'm watching them all evolve with interest.

The lessons from the failures are in many senses more interesting than the successes. There are so many more failures than there are successes, but I do think the games world is the most interesting laboratory for freemium right now, and I follow it more closely than any other industry.

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Todd Bishop is managing editor of TechFlash.