Lessons were learned during the dot com bust of 2000. You don’t sell things for less than they cost and you don’t give things away for free. Ten years later, we’ve learned quite a bit. Monetizing any content on the Web has been a challenge. A small tweak to the dot com business model and we get “freemium.”
Freemium means offering a basic digital porduct / service for free while offering a premium product/service for some monetary amount. Chris Anderson wrote a lauded and criticized book on the subject and the accompanying economic model called Free: The Future of a Radical Price. Asking people to pay for anything online can seem very challenging. Web surfers are used to getting things for free. Web surfers think advertising should pay for content. Most Web sites / blogs / podcasts simply don’t have a large enough audience to monetize using traditional advertising. Even if they did, it won’t solve the problem of overhead costs – just look at online newspapers. Fred Wilson, New York Venture Capitalist, disagrees somewhat in this post:
Lambasting file sharers and entrepreneurs who rightly recognize that free is the right way to build market share on the Internet might be fun and make certain people feel good. But it’s ignorance of a fundamental fact. And that fact is that free, ad supported media works best on the Internet. We have seen it again and again. I’m not going to even give examples. Once you have built that audience, you can deliver upsells via freemium models, you can monetize it via advertising and you can branch out into other services which are easier to monetize.
There is a caveat worth mentioning when it comes to podcasting and the freemium model, however. The freemium economic model based on digital distribution relies on distribution costs that amount to near zero dollars. For normal Web content like text and images, this is true. But not for popular podcasts. Podcasts need bandwidth, and bandwidth costs money. This explains YouTube’s popularity – and its monetary losses. So how can a small Web site / blog / podcast make money using the dichotomy of freemium?
You need to give people what they want. They want free. To put it in perspective, you need to be an online drug dealer. Give them a free sample, get them hooked, and then once they are hooked they will realize that they can’t live without your product or service. Then they will pay. This only works however, when you have something unique to offer online. In real life, you get drugs from your local drug dealer. Online, you can get drug dealers all over the world in an instant using Google. So, your product needs to unique and focused.
For example, I started SAVAGEpodcaster.com because there weren’t any good Web sites that covered the topic of podcasting and audience building strategies. With my Web and journalism background, I thought I would be well suited to fill this online void. Not only that, but podcasting is a topic people really love and are passionate about. Online, you need to fill voids with your product or service. Like Darren Rowse of Problogger mentions often, you need to build an audience. Having blogged for a few years, I can say that you can get a lot of traffic with random keywords in your blogs, but that traffic bounces once they get their “quick fix.” When you build an audience and fill a niche, users don’t bounce. Good drugs make sure of that.
Being a deep topic, upcoming posts and podcasts will feature the freemium model and how to monetize it. Check back next week for these topics:
- Monetize podcasts using freemium methods
- Monetize podcasts using iTunes