Now that giving away products and services for free is a viable business model, will a profitable model of paying consumers to use products emerge?
by Louis Cammarosano
In any transaction two parties assign relative values to what they are exchanging. A purchaser of a cup of coffee at Starbucks values the coffee more than the three dollars in his pocket and Starbucks values the three dollars more than the coffee it is selling.
The pricing of goods and services has been established in this manner for centuries. Some people will not pay three dollars for a cup of coffee, but others will. Starbucks determines how much it will charge and consumers how much they will pay through the price discovery mechanism of the free market.
In recent times, a new form of exchange has emerged that the price discovery mechanism of the free market has not yet fully tested.
These new forms of exchange involve companies giving away products and services for free.
We can refer to these business practices as the freemium or freeluxe models.
Under the freemium model a company gives away a product that is either feature, time, capacity or customer service limited with the goal of eventually charging the customer for full use of the product. Examples of this model include Pandora and Flickr.
The freeluxe model, in contrast, starts with no limitations on product usage and its business model does not depend on ever charging the user. Examples of freeluxe business models include Google, Facebook, Twitter and You Tube. The user has full access to all features of the products and never pays the company in exchange for their usage.
Gmail- A Freeluxe model that works
Under the freeluxe model the company offers the product and the consumer “exchanges” his use of the product in return.
The consumer deems the value received from using Google’s Gmail sufficient to his consent to use it.
Google in turn through the consumers’ use of the Gmail product receives a plethora of information about its users that it can then employ in the individual and in the aggregate to determine user behavior and preferences to sell advertising.
The relative monetary value that consumers place on their consent to use products like Gmail is nothing. But should it be? Should the consumer ask to be paid to use products such as Gmail?
Sound ridiculous? Perhaps Google one day WILL pay consumers to use its products-especially in areas that he has not gained market share-think Google Plus or the defunct Google Buzz.
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