Making money by being free
I’ve been surfing around recently and looking at some startups and their business model. Notice a lot of companies adopting a free for consumer business model. (OK, I’m not sure if there is a term for this kind of business model. Do let me know if there is a term for it.) I’m not sure when did this type of business model begin. I guess it has been around for very long time and the internet is an excellent breeding ground for this kind of business model.
Being free for consumer means that you don’t charge consumer for using your service. A great example is google. Google provides lots of service like search engine, word and excel processor, maps etc etc etc. All of them offered free to consumer. This is what that makes google so successful. They provide a wonderful product for free and generate revenues via other means like advertising. Imagine if google started out with a search engine which charges 10 cent for every item you search in the internet. Do you think anyone would still want to use it?
People are suckers for freebies. I admit I’m one of them. I lost count of the number of times that I sign up for something that is free. Being free does help to increase your exposure since customers lose almost nothing by using your product. But while being free does attracts lots of users, the quality of the products is the one that retain customers at the end of the day. No point providing a lousy product for free. If it is lousy, nobody would use it at the end of the day.
But how do you bring food to the dinner table if you are giving out your product and services for free?
Being free has its advantages. The biggest advantage is that you will attract a large group of users. These people are your assets and you should try to leverage on them. They are your best advertisers as they will introduce the service to their friends. They are part of your product as there are companies that might want to send them some advertisement. Forget about earning money first. Concentrate on your product and get as much users as possible. Once you got a large crowd, you have several options to monetize your product.
There are several ways to make money by being free.
The most commonly used method is thru advertising. By being free, your product and service attracts lots of customers. And there are surely some companies out there that want to tap into your customer base and advertise their products.
Working with other commercial entities
Another method is to allow commercial entities to use your service or even incorporate your service into their product and charge them a fee for using it.
Provide premium service at a fee
This is like a shareware business model. You provide a free basic feature of your service and charge a fee for premium service. The free basic feature will act as an advertisement by itself to attract the crowd.
Acquire by another company
This is perhaps everyone’s dream. By being free, you get a large following which will attract potential investors. And maybe one of the investor decide to acquire your product.
But note that not every service or product is suitable to be given out free. You need to evaluate your product and decide for yourself if this model suits you.
DK is blogging for free on Decayonnet. (Except for that recently added advertisement on the top by Advertlet)
PS: Oh BTW.... I still got 5 FREE pownce invites to give away. Anyone? :D