Free in 6 business models

Since the inception of the confinement, the free offers have multiplied, both to take e-learning courses and to provide us with all kinds of entertainment. The idea is based on the principle that, once tried, the satisfied customer will adopt it. In these circumstances, our e-mail boxes are always full of proposals that affect all areas of our daily lives and our telecommuting. As our habits change, we are obliged to know how to occupy ourselves, but also how to occupy the children.

Like other sales systems, free also has its own business models. Focus on six ways to sell a good or service for free.

The “Freemium” model, very present in digital.

Contraction of the English words “free” [gratuit] and “premium” [payant], the term “Freemium” refers to an economic model where access to goods or services is partly free, partly paid. This is very common in the online press and web services sectors. His principle? Offer the general user a free service where he can perform basic operations. If he wants access to richer functionalities, the consumer will have to pay. Mediapart is a good illustration of this model within the online press. Unsubscribed readers have access to a limited number of articles, while subscribers benefit from an interactive interface with enriched journalistic content (videos, photos, archives, etc.). On the web services side, we can take the example of data storage clouds such as Google Drive or Dropbox. In order to use these services, the Internet user generally has free access to a certain storage volume. But if he wants to increase it, or even have unlimited access to it, he will be billed for the service.

The classic advertising model.

In this model, the consumer has free access to 100% of the goods and services offered by the company, which are remunerated through advertising revenue. Fixed costs of operation, development, storage or related to human resources are covered in whole or in part by the money paid by advertisers. In return, the latter can display promotional content on the company’s public media. Very classic, this model has long been used by traditional media such as television, radio and the press. This has passed through time to develop in digital media, but not only. Web services, such as the well-known search engine Google, now an entity of parent company Alphabet, are financed entirely on this model. The latter has even optimized it thanks to its targeted advertising system. Result: Tens of billions of dollars in annual revenue, enabling the company to cover its operating expenses and invest in its research and development divisions.

Cross-subsidies and everyday consumer goods.

Giving a service or good in exchange for the purchase of another product is how you could sum up the cross-subsidy model. In other words, the donation depends on the purchase. This model is widely used in the trade of everyday consumer products. When an operator offers you a subscription by offering the telephone, this is cross-subsidised. Even if the phone has a certain price, it is not this purchase that is profitable for the company, but rather the monthly payments that are paid through the subscription contract. Ultimately, the user of the good or service “subsidizes” the product offered to him.

No marginal costs, jokester of the cultural industry.

In this model, the good or service is sold at a very low price with the prospect of a longer-term return on investment. Less widespread than the other methods, the practice of zero marginal cost is regularly used in the cultural and digital sector. In 2007 the American singer-songwriter Prince offered his album Planet Earth in collaboration with the British weekly Mail on Sunday. Three million copies of this newspaper were sold, but these sales were not profitable. It was of course on the purchase of derivatives and concert tickets that it was effective. That same year, the English group Radiohead launched their album In Rainbows from its website, leaving it to internet users to set the price themselves, even at 0 dollars! As a result, the median price of the disc was set at six dollars and it was the highest-grossing album in the group’s history. In addition, the positive buzz from this operation stimulated sales of the physical disc and the purchase of concert tickets. The free distribution of the intangible good, here a song, serves as a promotion for the sale of the tangible good.

The donation at the heart of open source.

As the name suggests, the donation model consists of offering the good or service to the user for free. In return, the latter is free to make donations to the supplier within the limits of its means. He has no obligation. The revenues depend on the generosity of the consumer. The leading example illustrating this practice is the Wikipedia digital encyclopedia. This provides completely free and free access to its database and regularly allows users to make a donation to the Wikimedia Foundation. These fund the costs of maintaining and hosting the site.

The exchange of work at the pace of the sharing economy.

Here the currency of exchange is no longer money, but the mutual services provided by two actors. Unusual until now, this model is starting to make its way into what is now called the “sharing economy.” The so-called “local exchange” (SEL) systems are very illustrative. For example, a member of an SEL can offer his “bricklayer” skills to another member, who will develop his website in return. Each service received corresponds to a number of virtual credits, which are accumulated by providing services. These credits can then be spent on receiving other services, but without exchange. In this model, wealth is not found in the purchase of goods or services, but in the exchange of work.

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