The growth of free research is an absolutely fascinating development. In a way, it’s an acceleration of what we’ve seen in the analyst industry, previously, in the form of White Papers. Often White Papers were working well for both analysts and for vendors. But now it’s very interesting to see this kind of logarithmic development, particularly, in smaller analyst firms who are trying to establish themselves, who are giving away their research.
It’s interesting; Chris Anderson, the journalist is well known as the author of ‘The Long Tail’, and the point he’s really making, is that when the marginal cost of something is pretty much zero (for example a report, it costs you less than a cent to give it away) and there’s no opportuity cost then the smart thing to do is to treat it as zero, and try to give it away in order to sell something else.
I think what a lot of analyst firms are starting to see is that, actually, there are two other things that free stuff can help sell; firstly, it can help sell their own consulting services, but, secondly, it can help sell things for vendors, and that’s why, if you look at the organisations that are giving stuff away, either they’re doing it in order to, either directly or indirectly, expand their channel into market, and to help people to identify solutions that their consulting services can help. Often what they are trying to do is give away information that helps people to identify problems in their own organisations, for which analysts consulting services are the solution, but, of course, there’s also the other side that often you get organisations, exactly like James Governor’s, where a large part of their revenue comes from vendor organisations who are sponsoring them in the hope that what they will write will help develop the market for the technology solutions that those vendors are generating.
So, when you’re giving something away free in order to sell something else, you can either sell something else to the people who are consuming what you’re giving away for free, or you can sell something else to somebody else whose incentive it is, is for you to be able to give it away. In the same way in a bar, they will give away salted peanuts because that makes you thirsty, not in the hope that you’ll buy more salted peanuts!.
The hope is that actually it’s basically a marketing tool that stimulates the demand for something else. But then there’s also a kind of footnote, which is that, if your research doesn’t help sell something, then, actually, it’s very hard for somebody else to pay you to do it, so imagine, if you will, the kind of analyst that comes out with bad news, or cautious news, then, actually, most of the vendor community, which is a major backer, isn’t going to be paying you, probably, to be able to say that, so it’s difficult to see how far it will scale. And also credibility, of course, is very uneven; some stuff that’s free comes from absolutely fantastic people with great insight, but other comes from people whose reputation isn’t so strong.
I think it will be very interesting to see, also, what parallels we can make with the traditional news media. If you think there are some news media who have been very successful picking up large scale advertising that allows them to heavily subsidise the cost of their print periodicals, and also to give away online the news that they have, and then, perhaps, at a more senior, more serious part of the market, you also see other organisations that aren’t able to collect the same amount of advertising, and still need to have really substantial cover prices, and can’t give away their content online economically. So, you know, if you think of The Economist, you know that’s pretty expensive if you buy a single copy in a newsagent, there’s not a lot of that content available for free, whereas, if I’m looking on the website of The Mirror, or Bild, some mass circulation daily, then of course it’s very inexpensive to buy at my local subway station, and, of course, all of the content is available for free online because the revenue is coming from advertising, rather than from readers. In some ways, we’re seeing the same trend in the analyst industry.