Broadsight - Web 2.0 Expo Presentation

The Limits to FreeConomics Alan Patrick Web 2.0 Expo Berlin

Today Discussion
The Digital Media Value Chain and Web 2.0
Limits to FreeConomics
Post Crunch Business Models

Today What is true – Metcalfe’s / Reed’s Law Aggregation Distribution Creation Customer Environment Archive Material Data Availability Bandwidth People

Today What is true – Moore’s Law / Learning Curves Aggregation Distribution Creation Customer Environment Creation Costs Archive Material Data Availability Bandwidth People Search & Aggregation Cost Hosting & Distribution Cost Equipment Costs

Today What is not true: Lower cost = Free ! Volume of Business P f C f Time
At First……
Cost of Start 10x Lower
Transaction Costs are non-zero
- Losses are affordable via capital funding
P 0

Today Free fails due to transaction costs Volume of Business Time - Every new node has transaction costs, and they also follow Metcalfe’s law - Transaction Cost losses are eventually unaffordable via capital funding - Requires income..…usually fast FAIL! P f P 0

Today The Hope…… Seedcamp 2008 Business Models via Wordle.net (Courtesy Guardian)

Today The Reality.… Total Online Ad Spend 2009 $50bn Google 27% Next 3 ~ 30% Next 30 ~ 30% Long Tail
Post It Note Analysis:
If everyone wants to be a $100m company…
… .and there is about $ 10bn tops to share easily….
… it means, on average, there is enough for c 100 companies…
..Globally !
Chances are, it won’t be you
eMarketer, Jefferies & Co, Broadsight Analysis 2009 2008 2009

Today Paddle, sir ? Credit: Funnypix

Today The game theory of “Free” Price Demand P £ D £

Today The game theory of “Free” Zero Price Infinite Demand P £ P f D £ D f

Today But if everyone else dives to the bottom too ? Thanks to http://threeriversfishing.blogspot.com/2007/05/everybodys-doing-it.html

Today The liferaft game Price Demand P £ P f D £ D f Your Increased Share Everyone else’s little increased shares

Today Spending a fortune for users who pay nothing Zero Price Finite Demand P £ P f D £ D f Your spend to keep Your Share Everyone else’s spend to keep Their Shares

Today Deja View media.ebaumsworld.com/.../ShitCreek.png

Today The 4 FreeConomic Myths Aggregation Distribution Creation Customer Environment UnmeteredHosting & Distribution Open, Free Services SustainableFree content Others will give you stuff for free - forever

Aggregator Today A bit of theory – standard supply chain Buyer Goods Pay Creation Goods Pay

Aggregator Today A two sided market Buyer Goods Pay Supplier Goods Pay Pay

Aggregator Today Free Content Forever – a UGC market End User Goods Content Creator Goods Fund No Pay

Today “ Digital Sharecropping” ?

Aggregator Today A multi sided market Buyer Goods Supplier Goods Fund Advertise Pay No Pay

Today An example Video Video Pay Ads Create

Today An example - Act 2 Video Video Pay 4 % Sue Sue Goods

Aggregator Today “ Offset” Economics User Goods Supplier Goods Fund? ? Pay No Pay

T&C TLC When you post User Content to the Site, you authorize and direct us to make such copies thereof as we deem necessary in order to facilitate the posting and storage of the User Content on the Site. By posting User Content to any part of the Site, you automatically grant, and you represent and warrant that you have the right to grant, to the Company an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to use, copy, publicly perform, publicly display, reformat, translate, excerpt (in whole or in part) and distribute such User Content for any purpose on or in connection with the Site or the promotion thereof, to prepare derivative works of, or incorporate into other works, such User Content, and to grant and authorize sublicenses of the foregoing.

Today What is your Net Present Value? Cumulative Income Money Time NPV of Cumulative Income

Data may be free, but its everywhere in chains

Today Those who pay the pipers choose the tune

Today Bandwidth too cheap to meter? Volumes Payment £ >> 0 Capacity 1 D £ D free Time Demand Capacity 2

Today Or The End for Aggregators on a Cheap Ride? All utilities become metered at some point, typically when capital replacement costs become an issue

Today The User Shall Not Pay ? Cost of Media Production favours Cr*p in Free market Poor Quality drives out Good Quality from Market Quality customers - then advertisers - exit market 500 Channelz… … .an nuffinz on Cr*p Quality

Today Gamechange ?

Today Companies under risk (1) – acquisition costs Many Players, Sticky Unique, Sticky (The Sweet Spot) Many Players, Not Compelling Unique, Not Compelling Churn / Lifecycle of customers Competition for customers Marketing Cost Community Retention Cost

Today Companies under risk (2) – distribution costs Video Text Video Social Net Social Nets Complexity Bandwidth & Hosting Transport Costs Community Care cost

Today Companies under risk (3) – no added value Entertain Dead Sheep What you really, really want Enterprise Productivity Quality Quality Costs Reliability Costs

Today FTW?

Today Safe Harbour?

Today “ Near Freeconomic” models (1) Razr & Blade

Today “ Near Freeconomic” models (2) - Freemium

Today Pay per Poke

Today Make it easy to advertise…. ABC Today Don’t Worry, Be Happy TV Lessons Predictability CPM / CPC Quality Content Good Metrics

Today … .pay to have Ads removed ? A recent IBM study found that the TiVo generation is officially online, with 11% of respondents happy to pay ' a little' to remove all advertising from videos. Consider the numbers: Google-owned YouTube pulls in something like 50m unique users a month; let's assume it can charge 'a little', a couple of dollars a month maybe - let's round it up to $24.99 a year for a 'premium user' service. Now let's assume that 11% of users sign up. That's a revenue stream worth $137m annually... Source: eMarketer (http://www.e-consultancy.com/news-blog/364572/one-in-10-will-pay-to-remove-youtube-ads.html)

[email_address] If you liked this, read our blog, Broadstuff www.broadstuff.com If you hated it, read the blog anyway – we likes the traffic 

http://broadstuff.com	413
http://www.broadstuff.com	120
http://www.ethanbauley.com	5
http://jisi.dreamblog.jp	3
http://www.slideshare.net	3
http://www.blogger.com	1
http://bummerware.tumblr.com	1
http://translate.googleusercontent.com	1
http://209.85.135.132	1

Broadsight - Web 2.0 Expo Presentation

by Broadsight

Accessibility

Categories

Upload Details

Usage Rights

9 Embeds 548

Statistics

Broadsight - Web 2.0 Expo Presentation Presentation Transcript