Thanks to Hannah Rudman for sending me a link to an article on Chris Anderson’s ‘Long Tail’ website about ’14 Free Business Models’, which is based on a paper entitled ‘Copying and Copyright’ by Google’s economist, Hal Varian.
The 14 business models which involve giving things away free include: ‘Sell Physical Complements’, ‘Advertise Yourself’, ‘Sell Information Complements’, ‘Site Licences’, ‘Sell Other Things’, ‘Sell Personalised Versions’ and ‘Ransom’.
Another blog post by Chris Anderson is about The Three Kinds of Free, ie (1) ‘Cross Subsidy’, where giving away one thing leads to sales of another, (2) ‘Third-Party Subsidy’, where advertisers, for example, pay for free content and (3) the ‘Freemium’ business model, where the vast majority of consumers get the product for free and a small percentage pay a premium for some kind of enhancement which subsidises free distribution to the majority. “In this model, charging a small percentage of a large user base beats charging a large percentage of a small user base”, Chris Anderson says.
Chris Anderson has also written the book ‘Free: How today’s smartest businesses profit by giving something for nothing’, which lists 50 business models that involve giving something for free.
There are plenty of good reasons to give things away for free – including making more money. The decision to publish my book ‘T-Shirts and Suits: A Guide to the Business of Creativity’ as a free eBook was based on the same kind of thinking as the business models described above.
Read also ‘Give it away free’ which includes example of how creative enterprises in Brazil and China have given things away free for smart business reasons.