Alban MARTIN @ Pau, 14th October 2009

Freeconomics on the internet

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

• Cheaper bandwidth & Cheaper storage

Source graphic: G. Champeau

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

• 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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

• Fluidity of information – online social links– efficient recommendation tools

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…enabled by structural elements…

• Critical mass of potential users (=audience)• The online advertising market

Display

Magazines

Press

Radio

TV

Digital

Others0

20

40

60

80

100

2005 2006 2007 2008 2009 2010

30%

14%

6%

29%

14%

6%

CAGR

20%

3%

3%

2%

1%

4%

Source:Zenith Optimedia; Yankee Group; Jupiter Research; ABI Research

Advertising investments Western Europe - (Billion €)

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

…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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Eight models for monetizing digital content

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

*

*

**

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

4 models in particular are “monetizing” free products and services

Source: C. Anderson, “Free”

Cross-subsidies

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%

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd Source: C. Anderson, “Free”

4 models in particular are “monetizing” free products and services

Example: Gmail free 8Gigas mail box

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd Source: C. Anderson, “Free”

4 models in particular are “monetizing” free products and services

Example: Free weather but paying full info

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd Source: C. Anderson, “Free”

4 models in particular are “monetizing” free products and services

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)

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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?

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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”

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Example of Google Maps

Source: C. Anderson, “Free”

• Innovation: cheaper AND simpler

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Example of Google Maps

Money for google

Money for google

Money for google

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Example of Google Maps

Money for google

Money for google Money for google

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

10 rules of free – C. Anderson

1. If it is digital, it will become sooner or later free2. Atoms would also like to be free, but not that

easy3. Free cannot be stopped4. You can earn money with free5. Redefine your market6. Pull price down as much as possible7. Sooner or later you will compete with free stuff8. Waste9. Free is making other things more valuable10. Manage abundance not scarcity

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

What if your consumers were doing your job?

• Cocreation of advertising– Dailymotion « motion

maker »– Eyeka « creatives »– Blogbang « creatives

and bloggers »

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

What if your consumers were doing your job?

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

R&D Marketing Sales 

Another model for lowering prices to the maximum : the cocreation of value

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

11/04/23

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

11/04/23

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

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

11/04/23

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

Another model for lowering prices to the maximum : the cocreation of value

Alban Martin – Conference @ Pau – 14 / 10 / 2009 – Creative Commons by-nc-nd

Thanks !