The “newest” business model being discussed online is the ”Freemium” concept of offering a free version of your product with options for paid upgrades. Chris Anderson has just published a book entitled, Free, the Future of a Radical Price and of course is offering it for Free, under certain conditions.
This whole “free” thing is nothing that new, it has been around for a long time (sorry pundits) in the form of free sampling used to get consumers to try a product. Lay’s Potato Chips had a slogan years ago, “…bet you can’t eat just one”.
Whatever happened to creating a valuable product or service and charging for it?
Have people been “seduced” by the low incremental cost model…just get 100,000 free members and if 10% upgrades at $20 per month…we have a business!!!
…or is this like the old saying “…we’ll make it up on volume”?
I don’t hear any online companies talking about creating a value proposition for their product. Online companies talk about having 400,000 subscribers and 1 million visitors per month. Who cares if no one is paying and only 10% of those subscribers have ever returned to the site.
I’m a big believer in creating strong value propositions which lead to lucrative brands like Coach, Coca-Cola and Four Seasons.
Of course online no one seems to pay for anything. The top 10 websites, Google, YouTube, Facebook and others are all free to the user. The major revenue source online is advertising.