Jeff Amerine
Techpreneurship, with Jeff Amerine
(Jeff Amerine is an IA advisor and officer with the University of Arkansas Technology Licensing Office. Each Thursday, his Techpreneurship blog will appear in INOV8. Drop him a line in comments.)
In this season of giving, why not consider the amazing power “free” can bring to a business model? Gordon Gecko in the movie “Wall Street” famously said, “Greed is good….Greed works”. My assertion in December 2009 is “Free is good….Free works”.
How can this possibly be the case? How can any business model be worth anything if services are given away for free? Well, “free” is not really “free” in the digital sense. The real question is, who pays? In most of these cases, the “freeness for the masses” is subsidized by advertising, and/or premium services.
In addition to free online services, a parallel Open Source software movement gains steam and viability with each new release. The theory behind open source revolves around the power of having a global community of developers working for “free” on the core software, while also building useful applications on top of the core open-source components. Every major category of enterprise software now has open-source options available — think Linux, Apache, Open Office, etc, etc.
In that universe, five business models have been defined to support the “freeness” of the open-source code: advertising, dual licensing, premium add-on modules, bundling with hardware, and professional services.
A pretty interesting series of Wired articles and YouTube videos by Chris Anderson, the editor of Wired magazine, discuss the issue. These were brought to my attention during a graduate seminar on the power of free given by a bright young techie named Aaron Richardson who works for a “major retailer.”
Check it out:
http://www.wired.com/techbiz/it/magazine/16-03/ff_free
As Chris Anderson says, “What’s the difference between something that is free and something that costs one cent? The difference is having to make a conscious purchase decision versus just doing it.”
So what’s the key message in all of this for the Techpreneur? As you consider your business model for an online service or enterprise software solution, carefully consider the powerful forces “free” can represent.
“Free” has both expanded the market and commoditized offerings across the spectrum of services.
Not long ago I was told by a prominent VC that no software deals would be considered that didn’t have the open-source distribution or a free service solution somewhere in the mix. There is little doubt that open source, cloud computing, mobility, and free online services are the forces shaping the digital landscape.
So who says there are no free lunches? Techpreneurs just need to figure out how to get paid and who pays. Simple right? Let me know your thoughts on the steady march toward digital “freeness.”
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I don’t think anyone monetizes free better than google.
Also I was watching a panel of young adults discuss what they were willing to pay for online, not surprisinly the answer was close to nothing… but one thing surprised me, they claimed they would be more willing to give personal information than to pay. Which opens up another business model for “free” services… bundling and reselling personal data for marketing research, ect.
Ryan
Ryan
Google drives the power of free better than anyone. My understanding is they plan to accelerate the growth of the Android mobile OS by giving third party developers 100% of the revenues from the app vs. the 70/30 split Apple uses at the App Store. I haven’t researched this aspect yet, but imagine the migration of developers that could occur toward an open and free Android OS…Should be an interesting battle to watch.