"We make it up in volume"
There's a new meme floating around, "Freemium", a cute/clever word for a kind of business model. Giving it away free.
Say what?
You may know that I am associated with a software product which is given away free. BlogBridge is a substantial, useful, real product, which for some crazy reason, we give away free. Everyone wants to know, "What's your business model"? So now I have a cool/web2.0 response: "Freemium."
Many people have written about this new term, even though as far as I can tell it was coined a few days ago! Aint the blogosphere great? Anyway Davd Beisel wrote a good summary of the basic concept and then builds on it, perhaps explaining why it is an appealing model:
"With the abundant number of technology-enabled services and content available today, customers want to mitigate risk in the usage and purchasing of them. By apportioning the clear payment associated with the value away from its initial transmission, business which do so address this need, fostering viral spreading, usage, and loyalty of their service." (from "Musing on Freemium and Ad-Supported")
My question is though, who is mitigating the risk for the author?
I've written about this, and have spoken many times about it: Why do we all expect great software to be free? Why do people turn their noses up when they are asked for a measly $29.95 for a work that took hundreds if not thousands of person days to create? In my opinion it is because of that expectation that we are stuck with monopolies and hegemonies that are so totally locked in. No-one can afford to compete!
Comments
I think the problem lies in the business model of traditional "shrink-wrap" software. The Shrink-wrap transactional exchange (you pays your money, you takes your chances) is tightly coupled. The Google ad model, however, is loosely coupled (e.g. the service is separate from the payment) and therefore more robust.
OSS and Web 2.0 is opening up all kinds of new models ("Freemium" being one of them) that encourage micro-payments which in the "long tail" will equal far more than the $29.95 asked in the traditional model.
Loosely coupled annuities are far better than one-hit wonders...we need look no further than the "free cell-phone when you subscribe to the family-plan" model that the mobile carriers are offering for proof.
Netting it out, I think the software business world needs to be thinking about new business models rather than [only] new software features.
Posted by: Mark Withington | April 6, 2006 10:10 AM