I’ve been wanting to write and speak about this oxymoron of a topic for a while but never seemed to find the right time for it. How can someone build a product and offer it for free, yet still build a sustainable business around it?
I think this is a very important topic to have a discussion around, because there aren’t a lot of people in this industry who have an answer. Its important for people to understand this so that they are able to better advise, appreciate and support some of the best ideas coming out of this industry.
I still get a lot of people who keep pinging me to help and the first thing I hear is either “why are you running blogs theres no business there” or “why aren’t you making money off of Green & White?”
I think both types miss an important point about new media publications – that the nature of this medium often disallows “old” or traditional business models… one where, say, I would directly charge people to read G&W.
This is a (now) common scarcity-vs-abundance debate. Traditional magazines create scarcity around the content that they pay to produce – they charge you for the ability to get new ideas and information about the industry.
New media is changing this with people like us, Netexpress, TelecomPK, and the citizen journalism sites out there – by completely opening access to content, both in production and in distribution, we are offering abundance instead of scarcity.
Now access to quality ideas and information is free, and this enables us smaller players to carve a greater niche in the media industry as a whole.
However, the theory goes that each abundance creates new scarcities – while access to good ideas might be abundant, there is a scarcity among people who are fully qualified to evaluate such ideas and execute on them – thus consultants living around a space of good ideas would find good business for themselves as analysts or special advisors to people for whom those ideas are important.
If you are in an industry of ever-decreasing margins, you have a very good bet of gaining attention by offering abundance on the low-margin product and scarcity around high-margin services or products around the old business.
This is a small example though, what I want to spend the rest of this writeup on is a series of solid strategies you can use to make money from offering something for free.
This writeup is based mostly on a Found+Read article that sums up these strategies in a very nice way.
Offer a free basic version, and charge for a more advanced version of a product
Your classic “freemium” model – supporting the free version is cheaper than alternate marketing campaigns, and become an effective way for people to test the waters with you until they are ready to move on to a formal relationship with your firm.
Charge for one product, develop others for PR and to build trust
A twist on the freemium model, where you are still using the free product to attract new potential leads towards your other (core) business line, but the paid product is usually something entirely different. The free product could also be used to build trust among potential customers.
Examples of this include Google’s array of free services and Salesforce’s development platform.
Single-Users for free, Multi-users will be charged
Another twist on the freemium model
Free for consumers, businesses will be charged
Most open-source software work in this way… enterprises need a certain degree of support that they are willing to pay for as a premium in exchange for piece of mind. This works, however, if you are generally considered a necessary overhead whose operation can be outsourced behind a premium support charge…. it may not work if you are offering something that affects someone else’s core operations.
Offer products for free and extract data from its use to sell
This is what RSS Reader companies and blogging platforms are doing to justify investing in essentially free products. Some example firms are Newsgator and Foxmarks.
Offer the main product for free, charge for complementary products
This is what justified the acquisition of MySql to SUN Microsystems – software could be free, but you pay for the hardware that is optimized for it.
Go through the Found+Read article for more details of each of these models… its a great read.
And if you find that people are just not understanding what you’re trying to do – dont lose heart…. its likely you just have vision.