A revolution has taken place and we haven’t really even thought about it, yet we are living it everyday. The majority of the Internet is Free. Free as in liberal speech and Free as in lunch. But its the latter that I am interested in and so is every Internet company (from startups to the established brands). Yes, we pay for our Internet usage to our ISP (well, those of us not stealing WiFi from our neighbors), but that is the cost of the distribution infrastructure, not the actual content. From news articles, funny on-demand videos, search results to your social network of choice – these are services that provide us with value at no cost to us.
Why we don’t pay for viewing websites?
The revolution is that as we move from the world of the atoms to the world of bits we inherently change our economic point-of-view. And why not? It costs an insignificant amount per user to distribute the 0s and 1s of the Internet that its not worth it for a company to charge nickels and dimes to us. Given the decision to pay even 1 cent online for everything we do would severely limit how we use the Internet. The mental cost of making the decision to pay for something would cripple our usage. Not to mention that a competitor would come along that will provide a free service because the cost is marginal for getting our attention. That has been the trend driving every website to move to a model where $0 is price to use their service. But then what? Sure it costs practically nothing to serve a single user, but what happens when you have a million users and “practically nothing” amounts to several hundred thousands in server and maintenance costs? So how does this really work?
Make money by making your website go viral!
Free is not a new concept, as Chris Anderson points out in his new book “Free: The Future of a Radical Price”. Marketers have been using this concept to get consumers to buy “2 for 1″ or to try out a sample that hooks you on the product, or even give away hardware for free or really cheap but make up the money on expensive but necessary accessories (think free printers to sell ink). Radio has been free and so has the content on cable television – supported by advertising of course. The move from Web 1.0 to Web 2.0 has been defined in various technical (desktop-like interactions, user-friendly) and social ways (collaboration, crowdsourcing). But one other way to describe it is the trend of building websites that gain lots of users as quickly as possible without a solid business model (also known as making your site go “viral”). Then somehow or other the site would make money by being acquired by a larger company or by laying out advertising on the page and hoping people would click on them. Well Google did it they say! But Google is a search provider – people are trying to find something, so its only natural to show them an ad. But you aren’t trying to find anything when you are talking to your best friend. The new web, Web 3.0 which again can be described in many different terms (semantic web, personalized/humanized web, mobile web) can also be thought of in terms of a more economically stable web. And we are in the midst of it.
Websites may even Charge you to use their service
Companies will no longer just rely on advertising (and advertising itself will be highly targeted and relevant). In fact, websites may even – hope you are seated for this – charge you to use their service! Actually, even this is not new. As in anything on the web, it is simply a reshaping of previous models and ideas. There is also no hard-line between the different “versions” of the web. What I am talking about has successfully been adopted before by Flickr, LinkedIn and Basecamp, but its adoption to the rest of the web is only now starting to happen.
‘Freemium’-10% users pay for all others
The business model is called “freemium”, where a basic form of the service is free and support say 90% of users, and premium features cost a subscription free per month or year by the rest of the users. So 10% of the users of a site can essentially subsidize the use for the rest of the 90%. But why would a company even care about those 90% of users? Well – they act as proponents of the service (word-of-mouth marketers) and as potential customer base to transform into the premium service. They also are very adept at producing content (added value to your service) and driving traffic to your site (increasing your brand and reputation). The real trick is figuring out what features 10% of your users will be willing to pay for and what limitations will not annoy your free users. But if you can figure this out for your web startup, then you can leverage free to actually make a lot of money. This may all be not-so-new to some of you but what will be interesting about the new sustainable web is how freemium and other creative business models that leverage free will evolve.
Author: Fahad Butt
