Perhaps this post will get you to think a bit…

Chris Anderson, editor at WIRED magazine, wrote an interesting piece about ‘FREE’ being the new business model online: In his article he discusses a couple of models of how the ‘freebie’ makes economic sense today and it might be useful to highlight a few others you may not have seen.

A famous one he starts off mentioning is King Gillette and his breakthrough of giving away razors to get people to purchase razor blades. He made a fortune that way and it is still done to an extent today as I recently was given a new Gillette Fusion razor at Waterloo station.

Think about mobile phone companies and their very cheap or free phones to get you to sign an 18-month or 2-year contract with them. But consider this…the Internet has actually created ways to monetise free offers.

A good example is all the different pieces of software you might have on your computer that are free to download but have some intrusive advertising or some key features disabled. Usually you have to pay for a premium version to get all the features you wanted.

Or how about services that start free such as www.deleteddomains.com which after getting lots of users (and fully testing the system), they moved to a paid version. But because it started free they probably have 20 times as many users as they would if it had started as a paid service.

Or online services like free email accounts. Yahoo recently announced they were following Google’s lead and offering unlimited email storage. How do they make money on this? By placing advertising next to you while you access or read your e-mails. NB as an aside we find that Yahoo mail positions can work extremely well from an ROI perspective.

The reality is that the economics of internet business have changed and it’s important that you consider how you might use the concept of Free in your own organisation.

Another two models of the Free Concept at work are as follows:
1. Something free in exchange for your e-mail address.
This has been used for many years. Typically you’ll see a ‘bribe’ available if you to leave your name/e-mail address in exchange for something else, such as information like a ‘white paper‘ or a discount catalogue.
2. A Free event e.g. a teleseminar (or increasingly a webinar).
These are typically content filled seminars followed by the promotion of a product or service at the end. The good ones are 95% real usuable content while the poor ones are 95% sales pitch.

The music industry has been adapting both of these Free practises at an increasing rate. Eels, Jarvis Cocker, The Horrors, Vampire Weekend and Slipknot are a few examples of artists who have offered mp3 downloads of new tracks in exchange for email addresses. Also free webcasts of concerts are becoming increasingly popular, with U2, Foo Fighters and the Dave Matthews Band streaming concerts on YouTube, Facebook and Ustream.

A last point: it’s vital to note something else Chris Anderson mentions which is that the real payment for all of these freebies is the consumer’s attention. And this is increasingly difficult to attract in an age of multi mass intrusive media where every spot or pixel is a promo opportunity.

And remember, even if your offer is zero cost – you still need to have a compelling enough reason for people to pay attention to you rather then the competition.

Other Users Also Read:
What’s In It For Me?
MySpace Music: Going Freemium?
SPOTIFY AND THE USA. WHY NOT?