l'economie du gratuit à l'heure d'internet

Alban MARTIN @ Pau, 14th October 2009 Freeconomics on the internet

Agenda

Why free, specially online ?

How to make money with free stuff

Concrete examples of business strategy around free products or services

Emerging trends of online advertising

Agenda

Correspond to the way innovations are created online…

Only 3 ways to innovate when launching a new online service or product (Jyri Engestrom)

Simpler

Or cheaper

Simpler and cheaper

Consequences: driving prices down from one service (or version) to the next one

… enabled by structural elements…

Cheaper bandwidth & Cheaper storage

Source graphic: G. Champeau

Cheaper technology

Ex Transistors prices :

1961 : 10 dollars

1965 : 2.5 dollars

1968 : 1 dollar

1975 : 0,1 dollar

1982 : 0,01 dollar

Today: 2billion transitors for 300dollars = 0,00000015 dollar

Source : C. Anderson, Free, Pearson education France, septembre 2009

« Web 2.0 » tools to engage and interact with the audience and cocreate value with customers

New forms of copyright (=copyleft) protecting digital creators AND enabling copies

Fluidity of information

online social links

efficient recommendation tools

Critical mass of potential users (=audience)

The online advertising market

Source: Zenith Optimedia; Yankee Group; Jupiter Research; ABI Research Advertising investments Western Europe - (Billion €) 30% 14% 6% 29% 14% 6% CAGR 20% 3% 3% 2% 1% 4%

… and increased by abundance…

Online copy = does not prevent from using the « original » copy = Non rival goods

Abundance of content, products and services versus scarcity

Democratization of creation and editing tools

Read write rewrite media

User Generated Content

… and increased by abundance…

57% of teens are content creators online (Pew internet)

2 billions pictures on FlickR (3/4M per day) and 4 billions sur Facebook

Facebook users translated the site from English to Spanish via a Wiki in less than 4 weeks and cost Facebook $0 (source: socialnomics)

More than 1.5 million pieces of content (web links, news stories, blog posts, notes, photos, etc.) are shared on Facebook…daily (socialnomics)

70 000 videos uploaded per day on youtube

2 millions articles on Wikipedia

8000 music albums on Jamendo and 250 000 songs on soundclicks

… deeply modifying resources management Source: C. Anderson, free, pearson education 2009, and online http://www.wired.com/techbiz/it/magazine/17-07/mf_freer?currentPage=2

Agenda

Eight models for monetizing digital content Source : Forrester Research, 8 models for monetizing digital content, june 2009 * * * *

4 models in particular are “monetizing” free products and services Source: C. Anderson, “Free”

Example: iTunes and iPod

Give a software + free content (or below market price content) for selling another expensive one

MP3 Margin : 1%

-60 cents record company

19c VAT

7c right owner

3c artists

1c bandwith

1c transaction costs

1c DRM

5c marketing & plateform hosting

iPod Margin : 30%

Cross-subsidies

4 models in particular are “monetizing” free products and services Source: C. Anderson, “Free” Example: Gmail free 8Gigas mail box

4 models in particular are “monetizing” free products and services Source: C. Anderson, “Free” Example: Free weather but paying full info

4 models in particular are “monetizing” free products and services Source: C. Anderson, “Free”

Example: Wikipedia

If you were paid a $1 for every time an article was posted on Wikipedia you would earn $156.23 per hour

+200K persons occupied by +150K open source projects (source: Ohloh)

Agenda

Example of 1-800-GOOG-411

7 billion dollars market per year for AT&T and other operators in the US

50cents to 1.75 dollars per call

Google enters the market with free information (whereas it could be charged 1Euros

Estimated “loss”: 144Million dollars until 2012

Why and for which benefit?

Example of 1-800-GOOG-411

Innovation: cheaper AND simpler

Quicker growth of market share compared to entry market strategy with paid information

Obtain for free millions of data for fine-tuning voice recognition system (=14M dollars worth of data)

According to Google’s Peter Norvig, “1-800-GOOG” serves as a trial for a mobile vocal search engine !

Search on mobile market will be worth 2.5billion dollars in 2012

Source: C. Anderson, “Free”

Example of Google Maps

Innovation: cheaper AND simpler

Source: C. Anderson, “Free”

Rapid growth and dominant market position thanks also to “open” API

Example of Google Maps Money for google Money for google Money for google

Example of Google Maps Example of 3rd party use of googlemap: http://earthquakes.tafoni.net/?hl=en

If more than 50K Pages views per day generated by 3rd party using googlemap

consider it is a dedicated business

 charge

10 rules of free – C. Anderson

If it is digital, it will become sooner or later free

Atoms would also like to be free, but not that easy

Free cannot be stopped

You can earn money with free

Redefine your market

Pull price down as much as possible

Sooner or later you will compete with free stuff

Waste

Free is making other things more valuable

Manage abundance not scarcity

Agenda

What if the time spent online with the products was entertaining?

Development of online brand content

“ relatively new form of advertising medium that blurs conventional distinctions between what constitutes advertising and what constitutes entertainment” (source: wikipedia)

Short movies, online series, clips

Events

web-tv

Guides

Calendars

Consumer magazines, books

Advergaming, advertainment

What if the time spent online with the products was entertaining?

What if your consumers were doing your job?

Cocreation of advertising

Dailymotion « motion maker »

Eyeka « creatives »

Blogbang « creatives and bloggers »

What if your consumers were doing your job?

Another model for lowering prices to the maximum : the cocreation of value R&D Marketing Sales

Another model for lowering prices to the maximum : the cocreation of value 12/10/09 R&D WHO? niche, mainly B2B, start-ups, SMEs, independant, also students HOW? cooperation & co-creation plateforms, in real life happenings (workshops, barcamp, conference) KPIs? # contributions, deals/new partners, ideas, suggestions

Another model for lowering prices to the maximum : the cocreation of value 12/10/09 R&D Marketing Sales WHO? Targeted and small audience, geeks, early adopter HOW? beta test, “netnology”, online discussion monitoring, forums KPIs? # answers, ratings, feedbacks

Another model for lowering prices to the maximum : the cocreation of value 12/10/09 R&D Marketing Sales WHO? opinion leaders, From small to large market, HOW? Blog marketing, Word of mouth marketing, Social Media Optimization KPIs? Audience, followers, transmission-rate, interaction with the message