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Making the "Free" Business Model Work In a Tough Economy
Randy Savage writes "With venture capital on hold and advertising revenue down, the WSJ discusses where online business models might go. 'Over the past decade, we have built a country-sized economy online where the default price is zero — nothing, nada, zip. Digital goods — from music and video to Wikipedia — can be produced and distributed at virtually no marginal cost, and so, by the laws of economics, price has gone the same way, to $0.00. For the Google Generation, the Internet is the land of the free. '"
The business model is very simple: Give the product away and make it up in volume!
Joking aside, there has never been a better time for free products. As the strength of McDonalds and Walmart demonstrates, consumers are looking for the cheapest prices to help reduce their costs. Even consumers who are financially okay at the moment are reducing costs to prepare for any eventuality.
If you look at the market, you see a lot of giveaways that used to be unthinkable. McDonalds is doing "free latte mondays" to draw business away from Starbucks while Denny's is giving away a free Grand Slam breakfast to each visitor tomorrow in an attempt to push coupon books out to customers. (Thus encouraging them to think about the large and inexpensive breakfast they can get there.)
The key is that these businesses have solid revenue models that their giveaways promote. Web-based businesses are in a slightly tighter pickel. With advertising budgets getting slashed across the board, ad-supported websites are feeling the same pinch as print and broadcast media. Now is the time to find alternative revenue streams such as premium content to back their free services. Things like selling larger downloadable versions of free web games or state tax filings to go with free Federal filings.
These are potentially sustainable models in the Internet age. They preserve the free service concept and allow consumers to evaluate the product(s). Customers then have a difficult time not paying for Premium features or content with real value. The "real value" is the key, of course. Which is something the internet has been missing with its premium features. (Video Game DLC is particularly bad in this area.)
Javascript + Nintendo DSi = DSiCade
from TFA:
> It's a consumer's paradise: The Web has become the biggest store in history...
Telecom companies implementing tiered service models, destroying Net Neutrality will fix that temporary glitch. While they are at it, lets hand-out to them some public bail out tax^H^H^H printed money for the privilege.
There is no "free" business model.
There are forms of benefit that don't come from giving objects in exchange for money.
This is exactly why the net needs a viable model for micropayments. And yes, I know, the abundance fan's response is that "money is obsolete, we don't need it any more"... People still want SOMETHING for their work, and while there have been all sorts of proposals, ranging from whuffie to all sorts of other trust metrics, micropayments would work just as well and would allow a tie-in to the remains of the real world economy.
Yes, free can beat not free. Can't argue with that.
You have to realise, however, that sometimes it's not the fact that it's free, it's the fact that's it's available at all.
Pirates don't care about international borders, different launch dates for different countries, how old the content is, etc, etc.
If you want to sell your content, don't build artificial borders that prevents us from buying it.
As an example: how long has the iTunes store been running? Why can't the labels tear sell their content to everyone on the planet? It's your own mess of contracts and licenses, figure it out for yourselves and leave us out of it.
Didn't I hear this once before, when the dotcom era ended and all the "free" businesses had to start making money? Realisticly all the "techy" parts like servers and bandwidth should keep getting cheaper, so that helps. And in a hostile market, marketing goes first as it's an "expense", then you lose your customers, then the marketing budget comes back. When else are you going to fight for your customers than when they're scarce? The alledged death of ad revenue is heavily overhyped.
Live today, because you never know what tomorrow brings
The real appeal of free software is in reducing infrastructure costs. Just like roads, they don't normally generate money themselves, but they make it easier for businesses to interact and generate wealth!
(-1, Raw and Uncut is the only way to read)
So, all those datacentres buying hardware and using electricity, are they free too?
Sooner or later there is a cost, and free services have one big problem for long term survivability, where's the profit?
A great free service may be fun, might even be useful, but sooner or later down the chain someone needs to be paid.
Or are all web developers working for no pay these days?
A learning experience is one of those things that say, 'You know that thing you just did? Don't do that.' - D. Adams
Not me, I don't care about Karma.
Posting anonymously to protect my Karma.
Debian Linux would have cost at least $1.9B to produce in a private environment. $1.9B may be smaller than what Microsoft spends on Windows, but it is a hell of a lot more money than "marginal cost."
Let's also not forget the fact that there are few, if any, desktop OSS apps that are as robust as, say, the Adobe suite of products or Microsoft Office.
It does OSS no service by giving people the impression that it is cheap and easy to produce. In fact, that is downright self-destructive because such an impression will make people behave even more like cheapskates. "What do you mean I should buy a supported license? I don't need to help pay for no stinkin R&D!! This stuff is supposed to be free? Why am I paying you anyway?!"
People in software development are the only ones I can think of who promote the idea that they should be paid less (e.g. this story) and that most of their colleagues suck (e.g. thedailywtf).
You can't sell that! Karma can only be portioned out by the cosmos. -Homer
"I use a Mac because I'm just better than you are."
Just about anyone 30+ can remember using Lycos, Alta vista, Yahoo, or Excite long before Google, and can remember typing in a single word, and having what you want in the first 10 results.
So yea basically before there were ad pages that contain nothing but keywords that were registered with the search engines.
but as camperdave said "The trick is that your ads must not get in the way of the consumer getting to the information that they want. If you break that popularity feedback loop, you'll drive consumers away. It has to be subtle enough to not interfere."
This is very much the reason google is nearing the end of its life cycle, and reason behind the need and great importance for them to hook you on email, web apps, etc.... Just as Yahoo and others did before. History really does repeat itself.
The P2P rip doesn't generate the $150 million dollars needed to produce "Monsters vs. Aliens" or the $40 million needed for the low budget "Serenity."
If the geek wants to see more films that appeal to him he has to find a realistic solution to the problem of how to pay for them.
Otherwise production simply ends or shifts to more profitable markets. "High School Musical" and a "Hotel for Dogs."
Unfortunately, your docs - most likely a downloadable pdf or similar - will end up getting torrented within the first five copies sold. If you don't believe me, go to The Pirate Bay and search around for technical docs and even entire books.