Hi guys, the following is a draft for a ebook about how freemium can help create a better world. It posed me a few problems, so it would be great to have some feedback.
Intro
Could a business model help create a better world? Initially this sounds like a phrase from a less than perfect after school special. Yet I believe that freemium can do just that.
The word freemium is made up of the words free and premium. The freemium business model is built around giving one product away for free and then selling premium products. Like the way Skype is offering free phone calls over the internet to everyone and selling premium calls to landlines. (For more information on freemium, see the freemium 101 eBook)
Because of freemium, businesses share their tools, knowledge and culture for free, in order to sell complementary products to a small percentage of the free users. The free product will benefit everyone, not just the ones that buy something else. Access to this tool, knowledge or culture can create a quality of life. At the same time it can act as leverage for creating improvements for a larger group of people in a wide variety of ways.
Freemium is mainly a way to make more money for a business. Many businesses will find this model interesting, simply because of the possible profit. Thus freemium can be unique by creating a greater good as a consequence of individual economic interest.
In this eBook there will be a more detailed description of how the freemium business model can help create a better world.
Example: Flat World Knowledge
Basic Business Model
Flat World Knowledge is from a college textbook publisher. In most ways they are similar to other college textbook publishers. The way they differ is in the distribution and business model.
Normal publishers sell physical books through bookstores. Flat World Knowledge delivers a free PDF download to everyone on their website. They then make money from selling a variety of complementary products – ranging from print on demand paper versions of the book, to audio versions and a marketplace for notes and other study guides.
A Better World?
While the company makes money from the range of complementary products, the textbooks are available for all to download and use. This includes less fortunate school systems. This resource is made possible because Flat World Knowledge has an economic incentive to do so.
Perspectives
Since the mid-1990s, the internet has become accessible to a large number of people. In 2008, almost 25% of the entire world’s population and 75% of North Americans were internet users.
With the internet comes the possibility to access knowledge, culture and tools, which, in turn, will greatly help create growth and a better quality of life throughout the world.
Yet There Is a Limitation in the Area of Access
While everyone might have the technical opportunity to access everything, this will not be possible if the producers charge for their content. This will often be the case, as they have to make a living.
So, while there is a technical possibility for access, there is no actual possibility to use all material. Basic information, like news, is typically available. While more complex and valuable tools, culture and knowledge are reserved for those who can pay.
Examples of Open and the Ramifications It Has
There are several movements trying to create a more open approach to access and ownership. A majority of such movements believe in freely available knowledge, culture and tools; that this can help create a better future. Some of these have also demonstrated great potential for doing just that.
Open Source Software
Open Source Software is software, where everyone is free to edit the code, and often it is also free to use. Linux is probably the best known example, but there are a lot of other programs in this category.
Because Open Source Software is freely available, it is often a much cheaper alternative to commercially available software. This has helped education systems and governments use money for creating better opportunities for students and citizens, respectively.
The “open” nature of Open Source Software also facilitates the use on a variety of projects. A great example of this is the one-laptop-per-child project.
Creative Commons
The license that makes the open source movement possible is targeted at software. In 2001, a group of people created a similar license, aimed at culture and knowledge – the Creative Commons license. It is the legal infrastructure that makes it possible to share culture and science.
Since the beginning of this movement, there has been million of works shared under this license. Free for all to listen to, read or share.
Architecture for Humanity
This is a non-profit organization that aims at improving the world through the sharing of architecture. The concept is to create and share architecture plans, which will make state of the art housing technology available for to a larger cross-section of people.
Through this platform, it is possible to share better designs for homes, schools and shelters.
These three are great examples of open, and how it can change the world. If you have made it so far, you probably agree that open is a good thing. The next logical steep is to explore how it can be combined with a viable business model.
Getting to Freely Sharing
While usually, only those who pay will have access to valuable and important knowledge, there are some exemptions to this; instances where tools, culture and knowledge is being shared to a large extent. There are two main motivations behind this sharing.
1 Philanthropically-Inspired Free Sharing
When a person or institution lets others access their information, it is mainly because they believe that they ought to share it freely. A great example of this is the open courseware by MIT. They openly share all the courseware developed by their famous university.
2 Free Sharing Because Of Financial Incentive
This occurs when someone has a commercial incentive to sharing. The previously mentioned example of Skype is a great demonstration of this. They freely share their tool for calling between computers. The reason for doing this is so that they will earn more money.
The philanthropically-based sharing is very inspired, even though it is somewhat limited. This limited number of occurrences is mainly because creators of most tools, culture and knowledge also have to pay their bills.
It is thus worth considering sharing with financial incentive as a desired outcome; more so, since this opens up the possibility of creating a profit that turns over from the freely shared product. As and when an increasing number of companies can create viable business around freely available tools, culture and knowledge, a much greater amount of quality work will be available.
This tendency can already be seen with respect to internet tools. Valuable tools like Skype and LinkedIn are available to one and all. The reason being the company behind can create a profit because of this free product.
Examples of making money because of open, as a result of free.
Besides Skype, there are a lot of examples of companies making money because of a free product. The following are two examples of how freely sharing can also be good business.
The Open Source Software Industry
Initially open source had been an ideologically founded movement. Yet now, it has reached a level where a lot of programmers and companies are making money from creating something that is given away for free.
In traditional software industry, the main source of revenue is software licenses; selling others the right to use it. Yet the open source software industry is actually giving this away and making money through other channels.
For example, IBM produces 100 million worth of work on the open source server software Apache, every year. They then make money from selling complementary products.
Free culture
In the last 10 years, there have been a lot of people freely sharing their books and music. Initially many of them did this because of idealistic reasons. Yet as with open source software, many of these now also share for financial reasons.
Like Nine Inch Nails, who released their album “Ghosts I-IV” under a Creative Commons license, which made it free for fans to download and share. They then made money from a range of other products, from a $5 download to a $300 deluxe-edition box set.
It is impossible to know exactly, yet it is highly likely that this album has made more money for the band; probably more than a traditional release would have.
Sum up
Imagine a world where most tools, knowledge and culture were freely accessible. Imagine the effect it could have on you, your community and the world. Using the freemium business model can be a step in that direction. By creating business model, where freely sharing equals more profit.
Members of the environmental movement have been trying to make people cut down on energy usage for several decades. Often they have had a hard time convincing companies to do so. One thing that has helped quite significantly in this regard is showing the economic benefit of decreasing energy usage.
What you can do?
If you think this sounds interesting, there are a number of possibilities for finding information and taking action.
You can share this eBook with a friend:
For more links to the ideas behind freely sharing, see the blog post: Ideology of open
For more information about the freemium business model, browse through the freemium blog and the freemium 101 eBook. If you feel that this sounds like something worth trying, the blog contains a number of tools, both for harnessing the freemium potential of your business as well as for direction on how to create and implement a freemium business model.
Related posts:
2 Comments
very interesting post - appears to echoe Larry Lessig’s “Remix” on some points - I am really bought into freemium - but many “traditional” investors & VCs have a hard time getting their head round it - “why would you give away anything?” has been a question that has been asked - maybe we are talking to the wrong types of investors?
In addition to this approach based on examples, which demonstrates the positive influence of freemium quite well, it might be worthwhile to add an economic approach to the matter. To do so, two aspects should be defined first.
To compare, and thus determine if something is ‘better’ or not, one needs a reference point. The freemium could be compared to the situation in which no compareable offer exists, or these where it is either free or paid only.
Secondly, a definition of better is needed. A frequently applied theorem in economics is the Pareto efficiency criterium. Thus, to qualify as better, freemium should ensure no party incurrs a negative value of the offer.
Next, for any desired combination of comparison point and involved party, an analysis can be made to determine whether or not freemium fulfills the Pareto efficiency criterium.
This comment is a summary of a longer blogpost. Read the full text on http://fjorir.blogspot.com