Free: Class Overview and Introductions

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This is the overview and introductions lecture in Stanford BUS 21 Monetizing Free: How to Make Money b y Giving Things Away

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Free: Class Overview and Introductions

  1. 1. Stanford BUS-21 Martin Westhead Mastering Marketing Class Overview How to make money by giving things away
  2. 2. Administrative Stuff  Timing: - Start promptly at 7pm. - Please let me know in advance if you will be late - Finish before 9pm  Tools: - Class linked-in group  Grading - Business plan - Contributions to class discussions - Contributions to Linked-in group  Slides published (for Free!) - Slideshare.com
  3. 3. LinkedIn Group  “Monetizing Free: How to make money by giving things away”  Please read and contribute - Comment on discussions - Share ideas and links - Discuss class material  Grades (for those being graded) base partly on your contributions  http://linkd.in/1ll7LNy
  4. 4. Grading - Business Plan  Business plan for business that uses free can be: - A new venture - A new product of an existing venture - Real or imagined - Non-free plan to deal with free competitor  Slide deck: - Business model - How and when will you make money - Competition - How will you beat existing competition and stay ahead of new competition - Launch plan - How will you launch and get traction - Financials - Investment cost – how much will you burn before you are cash flow positive - Possible size of the opportunity - Analysis of the cost of supporting free offering vs. revenue  Best 3-4 presentations given to me will present on the last day - Key criteria: reference material from the class  Class chooses the best – there will be a prize!
  5. 5. Discussions  Opportunity for class interaction - 20-30 mins  Topics decided the week before - Come armed with thoughts and ideas! - Suggestions for discussion topics welcome  Contributions count towards grade  Be polemic! - Discussions are no fun if we all agree 
  6. 6. Guest Lectures Brandon Harris – Senior Designer, Wikimedia Foundation Peter Fishman - Principal Analytics Manager, Yammer, Microsoft Mystery guest ?
  7. 7. Introductions - Me  Martin Westhead - Engineer and entrepreneur - Director of Global Payments at Groupon - PhD from the University of Edinburgh - Using and developing web technology since 1993 - 5 years at Ning a large-scale (initially) free social network service - Excited about this course  Experience in Communities and Monetization - Run payments for a $6B business - Teach classes on Communities and Subscription business model - Executive experience in Free Internet businesses
  8. 8. Why do I care about free?  Followed the Web from the start - 1994 1st WWW conference at Cern  Early business models (90’s) - Build a free service - Get it as big as you can - Sell it to someone - Didn’t make much sense outside the Valley  Google, Facebook… - Free services can make money  2009 Joined Ning - a free service without a business model - Watched the search for revenue until - a year later moved to paid  2011 Ning bought by Glam Media - I learned about Media business models  Open Source - Changing the software industry - Kill Bill Open Source billing  Changing our view of customers, customer value and even of corporations  What makes Free work? - Ingredients for success - Avoiding Failures - How do you make money? Nothing more disruptive than a free price point
  9. 9. Introductions - you  Introductions - Name - Background - Why you’re here - What you expect - One non-class related fact about yourself
  10. 10. Poll: Free is obvious 1. It is obvious that Free-based business are the future 2. There’s no such thing as a Free lunch: its all smoke and mirrors and clever marketing 3. I think Free-based businesses are interesting but I’m not convinced they really work
  11. 11. Poll:B2B or B2C 1. I am most interested in consumer businesses 2. I am most interested in enterprise businesses 3. I am interested in both
  12. 12. Poll: Freemium or Platforms 1. I am most interested in Freemium 2. I am most interested in Platforms - Particularly Advertising 3. I have no preference
  13. 13. What to expect from this course  The use of Free is a huge topic - Spans centauries of marketing - Being reinvented recently  This class: - NOT an economics course or business theory - Practical introduction to the key concepts - Lots of examples  Free is NOT a silver bullet - You still need a great product  No single answer - Customize the ideas here for your use case - Innovate – Free is still a big experiment
  14. 14. This course is a Safari Study of Free business models is new It is Zoology NOT Physics
  15. 15. Class Topics  Setting the scene - Expectations - Definition of Free - History of Free - Psychology of Free - Twenty-first century free is different  Core concepts - “Free” models - Direct Cross Subsidy - Platforms (two/multi-sided markets) - Freemium - Pay what you want/Donations - Abundance vs scarcity thinking - Mindshare markets: - Reputation and attention - Demonetization  Filling out the picture - Competing with free - Open Source and Community - Donations and Pay-what-you want - Privacy, Abuse and Overindulgence - Case studies
  16. 16. Lecture Plan  Week 1 (April 1st) - Introductions - Overview - History and Business Models  Week 2 (April 8th) - Model: Direct cross subsidy - Psychology of Free - Guest lecture – Peter Fishman  Week 3 (April 15th) - Model: Two sided markets - Advertizing - Abundance and Scarcity - Class Discussion  Week 4 (April 22nd) - Model: Pay what you want/donation - Mindshare markets - Communities - Guest lecture – Brandon Harris  Week 5 (April 29TH) - Model: Freemium - Open Source - Class Discussion  Week 6 (May 6th) - Competition in Free Markets - Guest lecture – TBD  Week (May 13th) - Successful Free - Google - Games Industry - Unsuccessful Free - Ning - Privacy, Abuse, Ethics - Class Discussion  Week (May 20th) - Conclusions - Student presentations
  17. 17. References  “Free” by Chris Anderson - Free PDF / Amazon / Free Audio Book  “The Mind Share Market” by Nicholas Pujol - Amazon  “Predictably Irrational” by Dan Ariely - Amazon  Papers - “Two-Sided Markets: A Progress Report” Jean-Charles Rochet, Jean Tirole, November 29, 2005 - “Multi-Sided Platforms” Andrei Hagiu, Julian Wright - “The Art of Standards Wars”, Carl Shapiro, Hal R. Varian - “Competition in Two-Sided Markets” Mark Armstrong Department of Economics University College London August 2002: revised May 2005 - “Zero as a Special Price: The True Value of Free Products” Kristina Shampanier, Nina Mazar, Joseph L. Rotman, Dan Ariely
  18. 18. Free Monty Python November 2008

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