Successful Internet business models
Modern consumers don’t buy cr*p. We see more and more free products made available on the Web since businesses make the move from the material economy to the bits-and-bytes economy. Physical things are much more expensive compared to virtual ones and that is the reason why the free business model is becoming more and more popular.
As more businesses adopt this model you may have to rethink your business strategy because people may just stop buying your products if they can get the same for free.
Learn all you can about the free business model in order to stay ahead of your competitors.
Read Also: Handling The Business Side Of Design
Types of Free
1. Buy one get one free – This type of free exists with traders who want to clear their stock inventory. This sort of free sells because people think that they get more while buying less even though the fact is that they are spending money for free stuff.
2. Someone else pays – Via advertisements. People buy AdWords from Google and that’s why we get to use free mail, powerful search engines, great productivity features and more products for free from Google.
3. Cross-subsidy – Product X is free but the customer pays a hefty price for sub-product Y which covers the cost for both items, for example, you get a free razor but the blades are going to cost you for the long term.
4. Freemium – Quite popular these days. For example the basic account of the product is free but if user wants more features, he or she has to pay for premium services. Premium customers subsidize the free for products like Flickr, Dropbox, MailChimp. Critical mass is vital.
5. Gift Economy – The price for the product is not fixed, e.g. Wikipedia is the free encyclopedia that anyone can edit, people usually help by donating. Lost Type – you can pay as much as you want for the fonts you download but it is not obligatory.
6. Free for real – giving things for free without expecting anything in return, e.g. charity.
Numerous companies. Most of new start-ups offer something for free, for example Spotify, SoundCloud, Rdio, GrooveShark, Evernote etc. The same applies to older established brands like Twitter, Skype, Vimeo, YouTube, Google, Yahoo who all implemented something from this business model and successfully grew with that.
How it works
Michael Woloszynowicz explains how the freemium business model works and uses Dropbox as an example. To be successful with freemium you need massive amounts of traffic and a continuous flow of new sign-ups.