Fahad Algahtani
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In this article Chris Anderson explains the free business model and how many businesses have applied this model and how the economy in general is shifting to the “free” business model, which is providing services for direct costumes for free without affecting the business profitability. In the beginning of the 20th century, Gillette started giving razors away by bundling them with everything such as packets of coffee, tea, and spices for free, which increased the demand and sales of disposable blades. This was an example of one of the first free business models applied. Nowadays, different types of free have appeared, and here are some common examples of how free business model is applied:
1-The low-cost digital distribution led to a free web services such as webmail services and storage such as Yahoo mail.
2- Advertizing in public places and websites that provides services covers the costs of creating these services, which makes these companies provide their services for free, such as Google and MSN.
3- Cross-subsidies: this is giving a product away if selling something else.
4- Zero marginal cost: this is giving things that can be distributed without an appreciable cost for free, (e.g. online music).
I believe that advertizing is the most efficient way for business to cover their costs and start providing free services to customers. In other words, a company cannot depend on the revenues generated by selling costumers’ information to others in order to cover its services costs. I also think that 90% of the free services are in some way related to web companies and technologies, which is a key factor in the free business model success.
Max Schoenrock
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In my article, “Free! Why $0.00 Is the Future of Business,” Chris Anderson talks about how and why businesses today are selling their services and products for virtually nothing. Companies such as Google and Yahoo are two businesses that sell there service and access for absolutely nothing. E-mail, searching, maps, web page creator, these are all things that are available to us as internet users. So you may ask yourself, why do they do it and how do they make any money?
The main reason as to why this notion of “free” is the only way to be successful starts with the term “cross-subsidy.” In the article, Chris Anderson uses the well known brand Gillette as his model to explain this term. Basically what King Gillette did was give away free shaving razors to people in hopes that people would start using them then buy new razors and shaving cream from Gillette after their blades became dull. In turn, people started using these free razors, they became used to them, and then they started buying more razors and other Gillette products that went along with it. This idea sprung a whole new approach towards selling products and services to consumers. For example, Google gives away free access to their web site because they know outside businesses will pay Google to advertise their products/services to the billions of users they attract.
I found this article very interesting because I always wondered how companies make their money by giving away free things. Google was my favorite example because I remember when they first started out and now they are one of the top, most viewed web sites in the world. It all makes senses now. To compete with rival businesses, companies like Google have to offer there service free because if they don’t, then Yahoo will dominate the market because their service is free. It all comes down to who attracts the most users and how much free service can this web site offer me without asking for my credit card number. Free is the future of business on the web. More and more companies will soon be adapting to this idea as time moves forward.
15 comments:
'Free' is the kind of word that has many different meanings to different people. Free for you isn't necessarily free for me. What Chris Anderson is describing is that the cost of bandwidth, storage, and processing has become so close to free that businesses are actually encouraged to waste it instead of using other resources.
For example, bands offer their music for free via Myspace because they can make much more profit off of ticket sales.
"Invent something people use and throw away."
Joaquin Chapar- As has been seen in the article the old way of making profit and marketing your product [Gillette razors] has changed dramatically. The web has changed all this, along with Moore’s law and so now there is Free as the profit for future business on the internet. It is interesting to see that there are all these different reasons why it is free and also different ways to measure free. The web and technology are a affecting the way things are done in business today and this is an important step, because it dictates how revenue can be made. Now it is known that just because something is free does not necessarily mean it is free, there are hidden costs and these new business will prey on the ignorance of the consumer to make their profit. It is good to know these business strategies because the business will never tell this to the customer, otherwise the business would not have leverage/ one up on their business and consumer. The web and decrease of technology is a new territory, a vacuum, where new players such as Google have capitalized on FREE strategies and now are the big players, for now, in this new environment.
Companies now have to invent new ways to make money. The internet is turning entirely to free and so selling subscriptions is becoming obsolete. Instead you need to create user traffic and give those users what they want for free, but make money off of selling advertisements. I liked the quote that Google has now become the central banker of the internet.
I enjoyed this article, it was really easy to read/understand. I think "free" is the way of future business and advertisers are starting to adopt this idea. Giving away free service and charging for advertising space seems to be the way web sites now days make a profit. On the flip side, advertisers give away free products, in hopes that the consumer starts to like that product, then charge for additional components that go along with it.
This idea of free is very exciting to me. I goes to show that who ever can sell it for the cheapest amount will win. In the case of digital commodities zero is the lowest price. I think this idea also ties in closely to the idea of web 2.0. As things get cheaper the web moves more to a platform then ever before. Now the web itself isn't the business but the platform on which your business can be presented to the rest of the world. Also it is the companies that are gathering these endless amounts of information and organize them in a clear and logical way that are going to be the powerhouses of this new economy.
This article wasn't the easiest to read and retain because it's so long and there's so much new information in it. The part I thought was most interesting was "freemium". This refers to the 1% of users who pay for the premium subscription service and the 99% who use the free version. They say that the 1% who pay support the 99% who don't. I thought it was interesting how so few people pay for a much better service, even when the pay version doesn't cost all that much. This shows how people don't like to pay and that the prices should all be dropping to reach the most people for free.
craig sugiyama- i think that the idea of the free business model is ingenious. One of the more interesting things to read about in this article was the psychology behind something that is completely free and something that you may have to pay a little for. Most people will usually choose the thing that is free. This is why website such as google and yahoo are having such success. They are able to provide these free services then attract huge amounts of users to view their site and in turn advertising companies will pay them for this popularity. I think that today most of us younger generations take for granted the information and tools that we are given for free.
This article was pretty interesting. The idea of giving your product or service away for free seems in no way profitable at first glance. But through the technology they can do this and still make bunches of money. The idea of giving part away for free and making people buy the other part has been around for a long time, as the Gilette example proved. The way Google gives most everything away for free, and makes their money from marketing is awesome.
Kim McNeely-The concept of cross subsidies really stuck out to me in this article. Businesses are using a form of psychology on their customers in order to make a profit. By selling certain items for a really cheap cost, businesses can attract customers into their store. Once they are lured into the store, business make a profit by other purchases that the customer makes as well as the cheap item. This is the same as when companies will sell something for cheap, such as a DVD player, but have the price of the DVDs so high that they end up making a profit.
Darcy Crowell: I find the whole concept of "free" to be very interesting, but also manipulative (in a good, smart way). The idea of giving away a free Xbox seems like a great deal...but did you know that games are range from $40 to $70, prolly even more. So in reality, Microsoft makes up for the loss of one Xbox with the purchase of 5 games....very very smart. Plus allowing customers to experience their device also attracts others to buy one for themselves. Advertising these days amazes me, very smart.
Sara Supple- I found this article to be somewhat interesting, and long. The concept of free makes sense to me as a consumer today, but the reasoning behind it really stuck out. I found this passage particularly interesting: "From the consumer's perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're in an entirely different business, one of clawing and scratching for every customer. The psychology of "free" is powerful indeed, as any marketer will tell you."
People love things to be free. Just look how people flip out a sports games when Butch is about to throw a T-Shirt. The more that websites like Google and Yahoo! can offer free of charge, the more people flock to their websites. I have experienced first hand how charging nothing can help online websites. ESPN.com charges for much of the online readings. So instead of going to their website I go to FoxSports.com because it is free.
Free is not just free, it has a lot of meaning, and personally i think there are no free. Someone is charging.
However, it's getting bigger to get information from internet for free. And many websites are serving storage, personal space, like blog etc. And this is the resources of making business success. "Free" wasn't the meaning of letters it said, it's marketing name i think. it's not charging for person, but it raised huge amount of money to company.
and it was already invested by companies.
There is a certain psycological effect when people hear the word free. I fully believe that there is never a "Free" and that if you get something for free that has a value, you are paying for it in different ways. For example some companies offer free services and the sell your information to other companies as sales leads.
I think if you see the word free, you need to take a long look at what you are accually getting, and see what free really means.
There are six categories to that define the "priceless economy." But the one that stands out to me is the model of cross-subsidies. This isn't a new idea that came along with the advent of the web. Thirty years ago Betty Crocker would send a 3-ring recipe binder and one set of recipes to you for free, with a catch, though. You would automatically receive - and be billed for - a new set of recipe cards every month unless you contacted them to cancel the agreement.
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