Six Pixels of Separation - The Blog
January 19, 2008 3:48 PM

How To Make Money By Giving Something Away For Free

This Social Media - Web 2.0 world we've all come to embrace might well be causing some serious business issues that all of us will have to face in the coming years. While there is no economic proof of this, the discussions around whether or not we're heading towards another dot com bubble burst continues to peculate. Personally, I don't think we are facing another bubble burst, but there does have to be some kind of business behind all of this free stuff we're all giving away.

It's nice to know that you can read this Six Pixels of Separation Blog for free (heck, you can even listen my Podcast of the same name each and every week for free as well). Chris Anderson (author of The Long Tail and Editor at Wired Magazine) has titled his book-in-progress, Free, and everyone reading this post probably has a Facebook profile or has done a recent search using Google at no charge.

Everything is free - once you've paid for the hardware and access.

Facebook has a big valuation (some say close to fifteen billion dollars), and when Mark Zuckerberg (founder) was interviewed last week on 60 Minutes (available for your viewing pleasure here: Facebook: The Entire ‘60 Minutes’ Segment), he simply felt like advertising would be the way Facebook will make its money and be able to continue to provide the services it does for free. Google makes their money from those little AdWords (little... right...), so it must be the right way.

Think about that. Most people will tell you that they hate advertising. Most people will tell you that they also expect all of this stuff to be free. So, if this a translation of the old workout saying: "I hate jogging, I just hate not jogging more"? Do people hate advertising, but they would hate paying for some of this stuff more than dealing with the occasional ad?

If that's the case, advertising does not work.

What does work?

Content. Investing in creating content - text, images, audio, video - not only gives Consumers stuff that adds value to their lives, it gives them food for thought. It keeps them engaged for much longer than a 30-second spot and it's a lot easier to remember than that billboard they whizzed by on the freeway. People also, innately, like to talk about stuff they've read, seen or heard. This has been the whole "conversations" thing. Through these digital tubes, we can tell more than the person next door. We can create our own thoughts, memes, themes and get them out there in the world. Through these conversations, we're seeing the initial formation of communities. And while people do question the power and strength of an online, virtual community, there is more and more research showing that people are starting to feel as strongly about their virtual communities as they do about their real-life community (I believe this to be true, because I do feel that strongly about some of my online communities).

The money comes from providing valuable content because people who are following what you're giving them for free are also inclined to follow the theory of reciprocity. It's built into us. For the first few years, e-commerce models were built around providing the lowest price with no fee for shipping. This is shifting as well. Consumers (that would be you and I) are willing to pay a premium online if what we're getting has added value (Threadless doesn't sell the cheapest t-shirts and Zappos doesn't sell the cheapest shoes).

Companies are struggling with whether or not they should be Blogging, Podcasting, taking part in online social networks or building up land in virtual worlds because they're scared of the time and commitment it will take to create content on a consistent and fresh basis. Companies are still begging to see studies on the ROI of Blogging.

What's the ROI on Business Development?

Nothing has changed - except the channels and your ability to have a global voice.

When people ask Avinash Kaushik (Occam's Razor and author of Web Analytics - An Hour A Day) why companies like Google let people use tools like Google Analytics for free, Kaushik replies that it is a "faith-based initiative." By making Website owners smarter, Google has faith that they will spend more on stuff like AdWords, etc...

I see that as a business opportunity, business development and long-term growth. I don't see anything free about it.

By Mitch Joel


Comments Comments Feed
  • Posted by Michael Martine
    Mitch Joel

    When we say free, we mean free as in money. But there is always a price. In this day and age, what could be more valuable than money? Attention.

    I've experienced success with free content recently, when I gave away an ebook on how to start a business blog that I easily could have charged for. But money is pretty short-term compared to the long term value of the permission assets (you have to subscribe to the blog to get it), attention, and mindshare I received.

    Reply
  • Posted by Roland
    Mitch Joel

    I agree with Michael. The currency of the future is attention. Companies will have to give some things away for free in order to capture that attention. Once the deal has been made (I give you my attention, because you gave me something for free), there is room for asking for attention beyond the first step. Or shall we say: after people have offered their attention, you can proceed to show them things, offers, etc. for their consideration?

    Reply
  • Money ultimately comes from scarcity. If you own a ton of fresh corn, no price in the world is likely to make you want to buy corn for dinner, even if it's free. If you're starving, and someone has an ear of fresh corn, you'll pay ridiculous prices for it if you have the money.

    Information is rapidly approaching free. There's no shortage of it. Blogs, podcasts, web sites, conferences, journals, newspapers, television, magazines, YouTube, Twitter. The pile grows more every day.

    What grows more scarce?

    Time. Organization. Insight. Execution. Quality. Find a way to leverage the commodity (information) against something scarce and the money will be there faster than you can blink.

    Reply
  • Posted by Whitney Hoffman
    Mitch Joel

    I was listening to the Lexus & The Olive Tree by Tom Friedman on the way to NYC this morning. He said we are reach the state of almost perfect competition with the web, where price, margins, and everything else are in perfect balance, and if you stray very far out of those bounds, you could sink fast and never regain a foothold, if you are a producer. Consumers now have infinite choice, but what they don't have is infinite time as Chris said.

    For example, we used to have people make our travel arrangements for us, now we all do it ourselves online. (This is actually more efficient for me than calling a travel agent and having to explain my complex schedule, likes and dislikes to someone else.) Yet, we have also given up having a standing relationship with someone in the process, who used to know what we liked and looked out for good deals for us, or something special we might enjoy- we now call that Google Alerts. yet even this is narrowly tailored and won't surprise us with treasures like real people can.

    As we cut people out of our lives to take jobs on ourselves, like using tax software rather than an accountant, we are also cutting out relationships and opportunities as well.

    Sometimes this Do It Yourself (DIY) is great and I prefer it, and other times, like with taxes, I couldn't be more happy to outsource this to someone who enjoys the intricacies of tax law more than I do.

    The trick is finding a balance between what we can do ourselves, and what we are willing to pay others to do, because we value our time, energy and sanity more.

    Free always had a price, and to be honest, I would gladly pay Google a yearly fee to use their stuff, because it is wonderful and works, rather than Symantec, which seems to beholding me hostage for viral protection on my old PC on yearly basis (Pay or else...)

    Likewise, I think we have to value the time of our friends and colleagues, who while willing to help us when we ask, are not bottomless pits of advice and help gratis. This means you "owe" favors back whenever you can "pay", and you shouldn;t take any cycles away from anyone unless it's important.

    But that's me- your mileage may vary.

    Reply
  • This is what I love most about Blogs. Instead of having to defend my thoughts, every comment here was building on it and giving me much more to think about, rather than getting into a semantic debate about what I meant.

    Thanks for truly adding value and getting me to look at this thought from a different direction.

    I've heard the term "Attention Economy." I like that term, but ultimately, there will have to be a pay out. My guess is that all of this free stuff does lead to that, it just costs more upfront to build the relationship - both in time, effort and cost.

    Reply
  • Mitch Joel

    Giving away Analytics helps Google sell more ads on Adwords. Reporting is part of what sells these services and what lets advertisers and their agencies get efficiencies.

    Reply
  • Posted by John Meadows
    Mitch Joel

    I'm reminded of the model that is successful in Open Source Software. The software itself is the commodity, and is free. The value-add comes from the collective intelligence of the community, and specifically from consulting, customization etc. Ask the folks who just sold mySQL to Sun about making money from something you give away.

    Reply
  • Posted by Lawn Chair Millionaire
    Mitch Joel

    More than the money ,it is the reputation which carries the business through.What ever content you create,if it is valuable to many users and if it is offered free of cost,god no matter what ever happens you will definitely gain mileage in the long run.

    Reply
  • Posted by JeffS
    Mitch Joel

    Content and the word "free" are to very valuable resources - when used correctly and coupled with something the customer perceives as a need. The value needs to be there or good content and free items become worth exactly what they cost.

    Reply
  • Posted by Martina Carmona
    Mitch Joel

    Please send me more information regarding this opportunity. I am interested. Martina

    Reply
  • Posted by Martina Carmona
    Mitch Joel

    Please send me more information regarding this opportunity. I am interested. Martina

    Reply
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