consultaglobal

“The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.”

Read Chris Anderson’s “Free! Why $0.00 Is the Future of Business.”

In my previous post I shared some insights on cost efficiencies and cloud computing. So, there is a cost of doing business when delivering a service online. However, many end users are not actually paying for this services.

Acquisition:

• In some cases, such as twitter, the company is focusing on acquiring a growing and highly engaged audience.
• Some analysts speculate about the opportunity to monetize all of these eyeballs by means of targeted ads. Displaying banners that are relevant to each user being just a common example. Others talk about opportunities for brands to communicate with customers via twitter.

Ad supported:

• The above refer to free services subsidized by advertising, Facebook is a good example.
• Web analytics is key to understanding this phenomenon. All kinds of customizable stats and, most importantly, quality of engagement metrics, help advertisers better understand and target specific market segments and individuals.

Freemium:

• WordPress happens to be the open source blog service I’m using and the application can be downloaded for free. WordPress is also an online service that follows the so-called “freemium” model. So, they actually charge for value added features, such as additional storage and corporate services, CNN being one of WordPress’ best known customers.

Volunteers, grants, donations:

• Some other are free because they happen to be non-for-profit services. PBS Teachers makes available a wealth of online educational tools and resources.
• Quite a bit of user generated content is also available for free, some of which happens to be of professional grade.

Shelf life extension and experimental marketing:

• Some networks and studios make TV shows available on the web to extend their shelf life and to reach new audiences. Hulu streams online video supported by commercials.
• In other cases, the web is leveraged to run pilots and to conduct experimental marketing to figure out what works and what doesn’t prior to making sizeable investments in new campaigns. 

Users as testers:

• Last but not least, Google has become the poster child for “beta services.” The company makes features and services that early adopters can enjoy for free. In exchange, Google collects usage data as well as on the performance of the service. Additionally, some projects involve direct user feedback.
• The intent is to make any needed improvements while the service is still in the development stage.

As usual, I will welcome your comments and any examples of what’s driving 2.0 services to be made available for free and how they happen to be financially supported.

J. de Francisco blogging from Summit, N.J. on April 29

consultaglobal.org  :::  disclaimer & disclosure

Other posts of interest:

• Cloud Slam 2009 (1); (2); (3) ; (4) ; (5) ; (6) ; (7)
• Emerging Communications 2009 (1); (2); (3)
• twitter’s search for a business case
• 2.0 companies leverage 2.0 technologies
• open cloud manifesto