Free vs. Paid Business Models: The Hidden Role of Engineers as Marketers

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Microsoft Engineering Forum 2011.

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Free vs. Paid Business Models: The Hidden Role of Engineers as Marketers

  1. 1. Nicolas PujolInvestor, advisor, author of The Mind Share Market
  2. 2. Google: $160B Skype: $8.5B Apple: $320B Facebook: $55B? $0
  3. 3. BeforeNowAfter
  4. 4. Non-monetary transactions
  5. 5. Gift economicsBarter exchange
  6. 6.
  7. 7. 1Reference: Federal Trade Commission Guide 251.1 on the use of the word “free” in commerce
  8. 8. Source: http://web.mit.edu/ariely/www/MIT/Papers/zero.pdf, expanded in The Mind Share Market
  9. 9. Classic marketing: Productive marketing: Ad is a message The product is the ad P=0 P=0 P>0 Commercial transaction
  10. 10. The opacity problem of market shares
  11. 11. By nature, new demand (P2=0; Q2=maximum value)is not visible before: a) product release and b) awareness
  12. 12. Product 1: 90% market share Priced at P1>0 Product 2: 10% market share Priced at P2>0P1 P2
  13. 13. Commercial markets Mind share markets Product 3 appears, priced at P3=0P1 P2 P3 New commercial market
  14. 14. Downloadable software SaaS Higher education (digitization of bricks and mortar) Telephony Physical product trials Healthcare? Insurance?Productive marketing: Producing value to customers before a commercial transaction occursThe product is the ad, and affordable to everyone
  15. 15. 1. Two-sided platform: Different categories of users Ad-funded models, video games, shopping malls, credit cards2. Freemium: Same category of users Sub-categories to upsell(Semi-applicable: Tying)—“It’s free if you pay”More info: Scholarly papers on www.SSRN.com (technical) or The Mind Share Market (illustrated)
  16. 16. Conventional marketing Productive marketing
  17. 17. The subtractive future and what you can do
  18. 18. Price gaps will be filled Address pent-up demand, upfrontIf customers want freedom… Strains don’t belong (nuances)
  19. 19. Maximizes market share and profit, even in the absence of competition(Parker, Van Alstyne)Will solve other problems
  20. 20. info@nicolaspujol.com

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