Year: 2022
Type: book-chapter
Abstract: 9 "Free" is Not a Business Model: Business Models Behind FreeWho can boast of not having any free applications on their phone, looking for and testing new web services, especially if they are free, and appreciate being able to do a lot of research on the Internet for free?We are all free riders and digital businesses have understood this.Free access is an integral part of our digital experience, but what are the business models and their characteristics behind this free access?Often used to attract new users rapidly, what are the business challenges behind free-based business models?And can "free" work as a long-term strategy?9.1 Free as a "Hot Button"All the top 10 most downloaded apps in the world in 2021 are free to download and free to use.Equally and excluding e-commerce websites, the top 20 most popular websites in the world are also accessible at least partly for free.These illustrate the prominence of 'free' in the digital economy.Most digital users consult their emails, connect with friends, read the news, watch videos, and listen to music for free.And yet, there is another ranking that is worth considering.The ranking of the apps is according to the level of revenue they generate.Here, the app that tops the list is also free to download and partially free to use.This app-the dating app Tinder-offers free and premium subscriptions.This is called a "freemium" model: consumers can download the app and get access to a certain range of features for free, but if they want to use the app's full range of features, they need to pay.These rankings illustrate the counter-intuitive and paradoxical nature of 'free' as a business model.It can be seen as a marketing tool to achieve scale but can also be the foundation of a powerful business model.In this section, we review the marketing function of 'free' and then turn our attention to the diverse types of free-based business models.The popular adage There is no such thing as a free lunch conveys the idea that it is impossible to get something for nothing.The "free lunch" in the saying refers to the formerly common practice in American bars of offering a "free lunch" to entice drinking customers.So, "free" is very rarely free.In this case, users will pay for something elsefor example, the drink.If a group of users does not pay for anything, then they probably have their own intrinsic value.For example, nightclubs may offer free entrance to women.Women who tend to drink less may not be the ultimate target.Instead, through such a promotion, clubs expect to attract the more profitable "men segment".However, men want to meet women; hence the need to offer women a free pass.In other words, men will pay for admission and drinks to meet women."Meeting women" constitutes an element of the value proposition
Source: De Gruyter eBooks
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4311653131