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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
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.
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
Not me, I don't care about Karma.
Posting anonymously to protect my Karma.
not free, just zero obligatory cost to user. Google isn't truly free because you get AdSense on the right of every search, which are paid for by advertisers. Wikipedia is free but gets millions in donations from many sources.
Nothing of use is truly free to produce, (see parent) but since the cost of disseminating digital services divides to almost nothing per client, only a few of those customers need to support the provider to keep everyone in "free" service.
When I can try a fully-functional product/service before investing a dime, I am much more likely to pay/donate than if I am required to pay even nominal cost upfront. That is why I've spent much more on FOSS in the last 10 years than I have commercial software.
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."