A recent survey from Ipsos Mori of 1,000 16- to 50-year-olds in the UK with internet access found that people who download music illegally on average spend twice the amount on money on music as people who always pay. (Hat tip: Mashable.)

Internet marketers like Yaro Starak and Brian Clark give away tons of free content to promote their premium content. They have entire systems and processes for how to launch information products, and all you have to do to participate is hand over your email address.

David Meerman Scott claims that his free EBook helped him get 500 blog mentions and sell 30,000 books in 6 months. His philosophy is a one-up on internet marketers – don’t even require the email address. Let free be truly free and reach up to 50x as many people. Stop trying to measure your conversion rates like a marketer would, and just assume that the more you give the more you sell.

Chris Anderson has written a whole book to explain this phenomenon of “free,” entitled Free. He writes about how free music drives more sales of premium versions of the music (live concerts) and how free recipe cards once drove more sales of Jell-O.

Free content sells. It sells premium content, physical products, and valuable services. There are numerous case studies to prove it. And while some companies don’t want to believe it’s true, I think most people, even business owners, are really starting to get it.

Lately, I’ve been thinking about what’s next. What do we do with the idea of “free?” How can businesses work within “free”conomics? No matter who you are, here’s where you should be looking:

Can you accept “free?”

You’ve heard of grocery stores making zero profits on certain items, just to get foot traffic to their stores, right? These items are called loss leaders. And content is the ultimate loss leader – you trade time and expertise for nothing.

Sure, it sucks. If you are Britney Spears, you are making less money than before because you aren’t selling as many CDs.

But seriously, just get over it. The economics of many industries are changing. Accept that you need new loss leaders.

In your industry, what is the “free” content and what is the “premium” content?

Business magazines are in the spotlight right now trying to figure out just that.

Every industry has a premium, even if you sell physical goods. For example, in the fashion industry, the free content is the designs. Anyone can copy your designs – the premium is in the brand, the quality of craftsmanship, and the pleasure of having “the real thing.” Likewise, anyone can copy your technology, but Apple doesn’t seem to be hurting these days.

How do you monetize “free?”

Nobody does something for nothing. Even if you are writing a free blog with no ads, you are trading for something – relationships, an ego-boost, personal development… Are you monetizing “free” the way you want to be?

How should you monetize “free?”

Maybe you aren’t doing it optimally. One of my friends told me about an internship program he runs – “free” intern work traded for ample mentoring time. I asked him, “Is your time worth the same as their time? Could you be selling your time in the form of premium content to pay for the time they work for you?” In these cases, I like Sarah Evans take on bartering for business. There was a reason money was invented, after all.

What do you think of “free?” How does it affect your industry? How will you harness the concept to improve your business?

23 thoughts on “Free content sells. We get it. What’s next?

  1. Hm.. this gets me thinking about service industries and what they consider loss leaders. Because in service industries, what's “free” is typically expertise or manpower (or creative development). Sometimes even access to leadership or time to listen is “free” when it typically costs a client a per-hour fee.

    When I look at the advertising industry, there's a big argument going on over spec work. The fact that doing it automatically devalues it and the creative industry on the whole.. But the truth to the matter is that spec work is basically an ad agency's loss leader. And while most people want to argue the merits of spec work, it's good to start thinking about other loss leaders and other ways to monetize the “free” aspects of our work. Aside from spec work, agencies would likely be better served freely sharing their expertise (typically a premium) via digital channels like blogs. Some seem headed down the path (Razorfish? Digitas? BBH? Mullen? CPB?)…
    Great thought starters Monica.

  2. Hey Mon,

    Great post and ideas. I think about this all the time now. People are giving away their core content in order to get people in the door, not just some crap video or PDF.

    In the Internet Marketing space we are seeing people giving away courses that were once $500-2,000 for free to get people into a continuity program.

    We are actually doing the same with our next launch. It's an interesting time and I think you need to provide value and build trust before you can ask for money. Once you have that trust though, you can charge just about anything as people are really attracted to what you are doing and want anything that comes from you.

    Musicians have a great opportunity to capitalize as well – giving away music in exchange for exclusives, B-sides, concert tickets, clothing or one-on-one time in a membership style site.

    Lots of opportunity and honestly there are no rules right now.

  3. Josh,

    Very thoughtful comment. I definitely think in service industries the loss leader is your expertise. As a consultant, I'm constantly doing calls with clients just to get them interested in my services. Obviously, this blog helps bring in potential clients, but the competition is tough as “everyone” thinks they should be a consultant, even if they have a regular job and haven't a clue about what it takes to build a consultancy.

    I learned something new about ad agencies today. The intro work to land a client is similar to consulting, and I agree with you that the more expertise you can push out onto blogs, the less work you have to do with companies individually. Blogs and social media could be an optimization tool, if used correctly.

    Thanks for making me think Josh! Hope to see your blog updated soon.

  4. Greg,

    I don't follow the internet marketing space as well as you, though I've dabbled. I think it's crazy (and potentially unfortunate) that people have to give that much info away for free. It's almost devaluing the industry.

    That said, I guess the real takeaway is that people are getting savvier and the information that was once worth $500-$2000 is not worth anything but an email address these days.

    You could also think of it as the cost of trust. Hmm, just inspired a blog post :).

  5. Brenton,

    I struggle through this question with clients every day. Often, companies think they *are* giving away free content. When I tell them it's a small fraction of what they should be giving away, they get scared. After all, where do you draw the line and start charging?

    I struggle with this myself with my consultancy. My refuge is to ask my husband to play bad cop when I negotiate my rates (ie: “I have to check back with my husband to see if I can make that deal”).

    If you read the eBook I linked to above by David Meerman Scott, the conversion tracking will make more sense. The idea is really to move from a marketing mindset to a PR mindset. I can't say I completely agree with Scott, because he clearly does track his conversion rates (he tells you how many downloads he's gotten, mentions he's gotten, and books he's sold). His point is maybe to loosen up on tracking?

  6. I've been thinking about this for quite some time now, as I've been using more and more free and open-source software (WordPress and all the plug-ins that go with it is a big one). Absent the cost of hosting, I can build a blog 100% free, other than my time.

    The main thing I take away from all of it is that the tools are becoming a commodity. Whether it's content, software, or something else, the tool becomes the proverbial carrot. Start using it, then find out all the extras / options / consulting / etc is and go from there. And it's a matter of time cost, as you alluded to in your conversation with a friend about internships. How much is my time worth?

  7. Andrew,

    Your comment is really interesting to me. It just occurred to me that while newspapers and writers and musicians are whining about digital technology, software companies have figured out how to monetize.

    Like wordpress, for example – they sell hosting packages, premium support, etc, to bigger clients.

    If you can't figure out how to monetize, look no further than the software industry. Even Twitter figured out how to make money (selling search technology and data access to Google and Bing). Facebook is almost profitable too.

    Time is an upfront investment the same way raw materials are upfront investments. You just actually have to pay it upfront, instead of using credit from the manufacturer.

    Thanks for the comment!

  8. Carlos,

    I like that post. I love Seth Godin and agree that people need to just accept free. I love that you reminded me that free drives a small portion of people to pay for premium.

    It seems that the profits can still be made. It's just like everything else – figure out the economics of your product to know whether it's a good time investment.

    Thanks for the comment!

  9. Great article! It really is very interesting to see how business is transforming. The way I see it, the playing field is levelling out, these days and the Internet offers incredible opportunities for small businesses. On the other hand, the “new” business model is front-end heavy, meaning that you need to create a ton of value to give out for free before you can charge for anything. You have to create, create, create and give away stuff, perhaps for a long time, before you can start leveraging that content.
    I personally think we are very fortunate to have such opportunities, even if it does involve a lot of unpaid work and a bit of risk.

  10. Shane,

    That's a really positive way to look at it. I do think there is a lot of upfront work but ultimately it's more opportunities.

    And like Carlos said, we can't change it anyway! Complaining about free isn't going to fix things. So we should just roll with the punches and capitalize on the opportunities we receive.

    Thanks for the comment!

  11. I guess I am concerned about what this model does for small businesses and sole proprietors, and our economic rebound relies on growth in small business sector. I guess you have to find the right balance. It can be very effective if used selectively in lead generation. I am an advocate of inbound marketing techniques that push content out to bring prospects back in. But, I also work for a small consulting firm. I find I “give” away a lot of ideas when I talk to prospects on the phone. Some come back and do business with us. Some may take the ideas and do it themselves. I guess maybe it is about finding that balance. @sarahmontague

  12. Sarah,

    I hear ya. I have the same issues. Often, I give away “too much” information.

    What I've actually found is that giving away 90% of my general information is a fantastic way to convert a prospect to a lead. At times, we think as consultants that we are selling our ideas. The ideas are everywhere though. Someone could just Google to figure out anything we have to say at this point.

    Where I think consultants are headed is customizing the execution plan. I sell myself by sharing all my general knowledge, knowing that 99% of businesses can't execute on anything I say. I follow up after they've had time to try, and they end up hiring me because they need a customized plan.

    Perhaps this is not your experience, but that's what I've found in my field. Thanks for the comment!

  13. Yes, free content sells most especially if it helps your readers! In blogging, this is definitely true.

    In other industries, I think “free” is conceptualized in bundled services. If you get our service, then you get this free.

    The concept of “free' is also being used in food delivery services. You get a free delivery “IF” you met the minimum amount of order.

  14. Really interesting aritcle you linked to, just happened to stumble upon this blog because of it. I plan on using free to leverage my blog with higher traffic and build a personal brand. This will help with future business ventures, affiliate sales, and recently has helped with getting a book deal on the drawing boards… even after only blogging for about a month! Really powerful stuff if you can create great content and a solid reader base.

  15. In the Internet Marketing space we are seeing people giving away courses that were once $500-2,000 for free to get people into a continuity program.

    We are actually doing the same with our next launch. It’s an interesting time and I think you need to provide value and build trust before you can ask for money. Once you have that trust though, you can charge just about anything as people are really attracted to what you are doing and want anything that comes from you.

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