The Power Of Free For Your Business
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Companies giving away free products have been around for years. For example when opening a new account you would get a free checkbook full of checks and a key chain or when shopping in a grocery store you could get free samples of food for you to try. These free ad gimmicks have paid off in the past but we are now seeing a rise of free items on the internet like never before. What has spawned the growing demand for free online? The answer is lowering cost of storage and bandwidth and new technology that exploits the 6 free categories like never before.
Everything from comments on Amazon to free email has been implemented to add value to websites. All used and created for free as far as the user is concerned and the reason for this is everything that uses web technology has a cost close to zero. This extremely low cost has allowed companies to run a whole industry by giving almost everything away for free.
The 6 Different Kinds Of Free
Freemium - Free Web software and services, some content. Free to whom: users of the basic version.
Examples: Flickr is free but the pro version is 25 dollars a year. Yahoo mail is free but an upgraded account with no advertisements cost 19.99 a year.
Advertising: Free content, services, software, and more. Free to whom: everyone.
Examples: Google's pay per click ads and Amazon's pay per transaction ads.
Cross-subsidies - Any product that entices you to pay for something else. Free to whom: everyone willing to pay eventually, one way or another.
Examples: When companies like Wal-Mart sell a product at a loss knowing that they will make it up on other products people by in combination.
Zero marginal cost - Free things that can be distributed without an appreciable cost to anyone. Free to whom: everyone.
Examples: online music
Labor exchange - Free Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value.
Examples: Social bookmark ratings on Digg or comments on Amazon products.
Gift economy - The free items are the whole enchilada, be it open source software or user-generated content. Free to whom: everyone.
Examples: Freecycle on Craigslist (this is where secondhand goods are given away for free) or Wikipedia where users create the information for an online encyclopedia.
How Companies Have Profited
Company: Google
How they profit:
Google Search engine makes money from advertising when a user clicks on ads.
Google Gmail generates revenue from placing key word relevant ads in a sidebar when a user uses Gmail. Also you can upgrade your Gmail account for a fee and receive extra space.
Company: Yahoo
How they profit:
In the same way Google does. They create revenue from companies buying ads on search engine results page and advertising on free email pages. An extra money maker for Yahoo is you can pay Yahoo to list your site in its search engine pages.
How A Company Could Profit Using iTunes and Free Podcasting
Countless companies have used a free service called podcasting for years and have generated a large amount of revenue from it.
First, to be profitable at podcasting a company must have something of value it is giving away on its podcast. For instance one podcast about using good manners gives tips on every podcast about what is considered good manners and bad.
Second, the podcast must have subscribers or people who listen to the podcast on a regular basis. As a rule of thumb the more subscribers the more revenue you generate.
How it works it that a podcast will be tied with a product for sale that is similar. For instance a podcast on manners might be selling a book on manners or advertising for a company that sells manners products. It is the case that many times the product comes first and then to increase sales the podcast comes later.
How to really make money at podcasting is to sell and audio book made up of old podcast that the author has organized in a logical manner. For example, the manners podcast could sell a book of 25 manners one must know before meeting in-laws. This audio book would be a collection of the 25 best podcasts that the author feels one should know before meeting ones in-laws. Then list it for sale on iTunes. The author had to do very little work to make this audio book and passes the savings along to the customer for .99 cents, or any other low cost price.
The audio book is then advertised in all future podcast and the author always promotes it.
Since podcast are free and the price of the audio book is close to free, it would tie in with many of the free categories.
Bibliography
Free! Why $0.00 Is the Future of Business.[1]
The Long Tail [2]
The ‘Free’ Business Model: A Strategy for Attention, Traffic and Profits [3]