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Fifty “Free” Business Models That Are Working Right Now

Wired editor-in-chief Chris Anderson's new book offers advice that will help marketers in product development.

Ava Seave By Ava Seave
11/13/2009 -10:58 AM

When you read Chris Anderson’s widely reviewed book “FREE: The future of a Radical Price,” you can tell he has a day job. And I really mean that as the highest compliment.

As editor-in-chief of Wired magazine since 2001, he clearly can optimize whatever task is at hand. Wired has had nine National Magazine Award nominations since he came, and has won the top prize for general excellence in 2005, 2007 and 2009.

Anderson’s book, published earlier this year, applies his talents of imagination and communication to the consumer marketing and the infrastructure issues of media as digital tech makes them more and more challenging to manage and create profitable businesses.

Reporting the sentiment at a recent Ad:Tech NY conference, David Kaplan of paidContent says that the sentiment now is, “that although there’s no competing with free, it doesn’t mean you can’t make money….[P]ublishers don’t have to completely give up their reach-and-frequency-based models, but they do have to diversify their revenue streams considerably.”

Anderson helps with figuring out the additional revenue streams. In the last 12 pages, he summarizes much of what has been in the first 250 pages in a very practical checklists that summarize the business models, along with the pros and cons. Here are some highlights:

Fifty examples of business models that are a variation of “free” and that are working today —with specific product examples:

Four “freemium models”

•    Time limited -- XX days free, then pay; e.g., Salesforce model
Feature limited --basic version free, more sophisticated version paid; e.g. Surveymonkey or Magnify.net models
Seat limited -- can be used by up to some number of people for free, but more than that is paid; e.g., Quickbooks model
Customer type model --small and young companies get it free, bigger and older companies pay; e.g., Microsoft’s BizSpark

Conversion percentages of paid-to-free that demonstrates the range and the variations among products and population:

•    Club Penguin 25 percent of monthly players pay, $5/month
Habbo: 10 percent of monthly players pay, $10.30/month
RuneScape: 16.6 percent of monthly players pay, $5/month
Flickr users: 5 -10 percent convert to Flickr Pro
Shareware software programs: less than .5 percent users pay

Ava Seave is a Principal of Quantum Media, a strategy and marketing consulting group.

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