The subscribers shall keep things free, to a limit

If you remember a few weeks back I was fretting about the fact that almost everything on the Internet is free. This is what comes from a lifetime of being told that if a deal seems too good to be true (sub-prime mortgages, 99 cent laser vision surgery), it almost certainly is. I talked about how it seemed unrealistic to think that ad sales alone could support everything useful or entertaining that could be provided to us through a website.

I feel better about the prospects of enduring free-dom, if you will, after listening to Chris Anderson, editor in chief of Wired magazine, last week on National Public Radio’s Talk of the Nation. I already sent around the link to the program, but here it is again.

Anderson explained that we can get so many things online for free because it’s so cheap to do business in cyberspace. And it’s getting cheaper all the time as the prices fall on inputs like bandwidth and storage.

OK, cheap is one thing, but can you really give people something of quality online for nothing? Not exactly but close. Anderson described an online business model called “freemium,” which is shorthand for “free to most, premium for a few.”He gave the example of Flickr, the photo storage and sharing site.

Almost everyone who uses Flickr opts for the free basic membership. But the site offers additional features -- designed to appeal to serious or professional photographers -- for a subscription. Those subscribers, though a minuscule share of all Flickr users, pay the freight for all of us freeloaders and, presumably, supply a profit to Flickr’s owners and investors, too.

Anderson said this is the opposite of the old-fashion free-sample strategy – you know, where a bakery gives away 1 percent of its muffins in the form of free samples, or a department store lets women spritz themselves with 1 percent of the perfume, in the hopes that this will help move the other 99 percent in inventory.

Freemium, on the other hand, is giving away 99 percent of the product in hopes of selling 1 percent. This is possible only because it’s so cheap to provide many services online compared with, say, the cost of baking muffins or concocting, bottling and shipping perfume. As Anderson put it, “Offering a Web service to an individual, the sort of casual user, is so close to zero that you that can really round down.”

The problem with freemium thinking is it works only when your operating costs are puny. Moving digital bits is cheap and easy, at least for now. Moving atoms, in such forms as carpet or cars or milk, is expensive and complicated. Moreover, sites like Flickr, MySpace and Digg, whose founder, Kevin Rose, was a guest on the same Talk if the Nation as Chris Anderson, all get their content for free from their users and from the acquiescence of other sites in permitting reposts. Bakeries, department stores and other business that deal in goods don’t get their content for free.

Neither do service-oriented businesses like news organizations, universities or doctor’s offices. Money has to come from somewhere to pay the salaries of people with professional expertise. It’s hard to imagine any of those industries developing a premium service so desirable that it could be priced so high that if only 1 percent of customers bought it, the other 99 percent of us would be able to get our service for free.