More about free as a business model. Here is a talk by Chris Anderson given at Revenue Bootcamp Conference.

Some Notes:
-Quality is in the eye of beholder.
-There are multiple economies: In the currency economy may be free, but in reputation or time it may not.
-Offer the low cost product as free, and sell the premium one as paid.
-Number of packages: Keep it simple, three options, one for free, and two paid.
-Your free trial should be long enough in time to get users’ engagement. Chris Anderson advise against the common 30-day free trial; He explains that customers won’t commit in using your service when they know they might leave it. Rather, he advised to use limited feature freemium model.

Related Post: Free

Freemium: Free As a Business Model

Speaker: Chris Anderson

• Editor in Chief: Wired Magazine

• Author Of Free: The Future of a Radical Price

• Married, Father of 5

Summary

• Free is the most misunderstood word in English Language

  • In other languages has two meanings of free

    • Example: Latin: libre and gratis

  • Word Free Has Two Meanings in English

    • Liberty (Libre)

      • Good Thing

    • No Price/Cost (Gratis)

      • Possibly Good/Possibly Bad

      Example of two Free

    • Jello Company
      • wanted to get brand out/known
      • door to door best option (couldn’t get license too expensive)
        • instead of going door to door selling instead offered free jello recipe books
        • every recipe required jello ingredient
          • created demand/got name out

    Internet most competitive field:

    • Near Zero Market Production

• In digital economics the price/cost of zero (free) is competed with:

  • Example: Music

    • Some offer it free

• Some say you cannot compete with free

  • Anderson disagrees:

    • Example: Microsoft

      • Competed with free the longest

      • 1970’s Gates Needed to Convince People to Buy Software
        • (Software always came free with hardware)
        • Convinced People to Buy Software in Order to Get More Software
          
      • 1980’s: Microsoft Competitors Bundled Software with Computers
        • Created their own Microsoft Works only saved in their formats
      • 1990’s: Had to Deal With Piracy (Especially in China)
        • Gates responded mildly, not severely: Said: “China is a developing country, and if they are pirating software, we want them to pirate our software and when they are ready to pay, we hope they can pay for our software.” (paraphrasing).
          • Approach helped China to develop faster and helped Microsoft monetize from it.
      • 2000: Competed with Open Source:
        
        • Sold service contract: “peace of mind”. Someone legally bound to insure interests were protected.
      • Microsoft giving free (i.e not getting ruthless about piracy), and also giving enterprise software to start up businesses for free, help both (economy and business) to develop faster and make them ‘hooked’ on their products so they will pay later.
      • Free disrupts economies and demonetizes them before monetizing
        
      • Entirely free has limits
        • Not the best model
          
      • Freemium=Mix of free and premium.
        • Best model according to Anderson for 21st Century.
          • You can’t charge for exclusives that will just be repeated elsewhere
          • Don’t charge for the most popular content on your site
          • Content behind a pay wall should appeal to niches
          • The narrower the niche, the better
    • People will pay to save time
      • Video games: pay to play better (i.e. go to another land/level, etc)
    • People will pay to lower risk
    • People will pay for things they love
    • People will pay for status
    • People will pay if you make them
      • Time’s up, i.e. 30 days then pay (not the best model)
        • Your free trial should be long enough to get user’s engagement. Chris Anderson advises against the common 30-day free trial. Customers will not commit in using your service. They will use the trial, even when they know they might leave it
      • 5 Seats left (better)
      • Offer  low cost product as free and premium pay (best)
      • Quality in eye of beholder


Tags: business model, chris anderson, free