Thursday, September 03, 2009

Competing using Free Business Models

I just finished reading Chris Anderson's latest book - Free: The Future of a Radical Price. It is a great follow-up to his book - The Long Tail and recomending it to anyone who conducts business online. It is also a valuable complement to readers of Seth Godin as their insight combined can be really explosive for entrepreneurs.

The timing was also just right as I've been doing my free experiments for quite sometime now observing how people respond to it.


(Click the mind map image for bigger view.)

Anderson cited four free models in the market today that includes (will mention some of the free experiments I've been doing as well):

1. Direct cost subsidies
Customer gets a free product by paying for something else.

Example: When the DigitalFilipino Club was first created, it was intended to be an exclusive online paid community. Later on, I started offering new services and made them free to club members (or special rate if they want more) such as our upcoming E-Commerce Summit, hands-on workshops, webinars, among others.

New club members or those walk-in during the training help subsidize the conduct and cost of the said activity. It also allows me to gain new club members further. This is important as I strive to have a long term relationship with members.

2. Three party market
Products, information, or services get distributed for free to anyone interested. A 3rd party comes into play providing revenue which in turn helps in cost recovery and otherwise.

Example: The monthly State of E-Commerce in the Philippines webinar is a 1-hour briefing where relevant developments in the field gets shared. Participants can attend the event for free and this is subsidized by the parties involved and later on by advertisers.

This is also the same case for most blogs, forums, podcast, and other forms of content that gets disseminated online for free where revenue is generated through advertising, affiliate programs, donations, and the like.

3. Freemium
A product or service that has a basic or free version. Members who want more can avail of the premium or paid version.

Example: Membership in the DigitalFilipino mailing list and social network is free where updates, articles, reports, and free events get organized from time to time in various parts of the country. Those who want more can opt to become a full-fledged club member.

4. Non-monetary
There are stuff that can be given away to people without necessarily asking for money in return now or even later on. This can include reputation points, karma, power or influence, and the likes.

Example: We have four annual events that recognizes various accomplishments such as the Philippine Schools Cyberfair, DigitalFilipino Social Networking Awards, DigitalFilipino Web Awards, and the Top 10 Emerging Influential Blogs.

These are all done without asking the nominator, nominee, and winners for any mandatory fee. However, there is a lot of value in the recognition as the winners are actively used as case studies. During these events, empowerment of stakeholders, in a variety of roles, takes place.

Information wants to be free
The challenge for early players like me is the acceptance of the fact that the cost of producing and publishing knowledge is fast becoming cheaper than ever before. There are information still worth paying for but a growing number of Internet users wants to get them now and if possible - for free.

So to test what I learned from the book Free: The Future of a Radical Price, instead of charging a delegate fee outright to the DigitalFilipino E-Commerce Summit, I am making this free to club members and focus my efforts in boosting our membership base.

Although non-club members can still join for a fee and sponsors are needed, I outsourced that part so I can focus on my experiment. We also put our past events on video and make them accessible for reference. Some publicly while others within the club members social network only.

The increasing number of Internet users and competitive players provides further pressure in reviewing my current business model and innovate to ensure that we will remain relevant, remarkable, and strong in the years to come.

So last September 2, this blog turned 8 years old while DigitalFilipino.com will turn 10 years old this September 17. We still have a long way to go but always thankful for all the blessings - starting by having readers like you. Thank you.