Another Business Model That Leverages 'Free'
from the having-someone-else-pay-for-it dept
When I first heard about TrialPay, I thought it was a bit gimmicky. However, in reading through a NY Times article about the company, I'm realizing it's actually yet another example of how to use "free" in a business model. The service is mainly used by software providers (who, remember, are offering an infinite good, which will face pricing pressures towards a zero price). The software developers officially offer their software for a price, but then also offer it for free if you agree to buy someone else's product. For example, you can get free anti-virus software if you also agree to get a subscription to Netflix. Note what's happening here (and how it sounds familiar). Software providers are giving away their (infinite) product, but they're attaching it to the sale of a totally unrelated (scarce) good, and are then profiting from the referral fees associated with those other goods. In other words, even if not explicitly, they've realized that their software products act as a promotional good for those other products. What's most interesting here is that those scarce goods are totally unrelated to the software that's for sale, other than through TrialPay's service. Effectively, TrialPay has helped makers of infinite goods tie up their products with other scarce goods that people would have thought were unrelated. So, the next time someone insists that there can't be a scarce good attached to certain infinite goods, remember this example.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: abundance, affiliate programs, free, scarcity
Companies: trialpay
Reader Comments
Subscribe: RSS
View by: Time | Thread
This is new?
[ link to this | view in chronology ]
Netflix is not playing TrialPay for the software. They are paying TrialPay for getting a new customer. Netflix could care less what TrialPay's tactics are for getting Netflix a new customer.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
McDonalds the world's largest toy distributor gives the toys for free they make money though don't they
If you want music and software for free who is going to pay for your benefits
if I give you, and hundreds of other people, a free t-shirt so that you come to my time share seminar and you don't buy the time shares I pay for the t-shirt if you do buy or if any one person buys they pay for the t-shirts.
So I have to ask if you are a person who wants to buy a time share do you really want to pay for all the free loaders who scam free t-shirts
Get a life Mike stop making the world pay for you free loading ass
[ link to this | view in chronology ]
Re:
If you were smart, your shirts were of such low quality and thus so cheap, that the selling of one time share effectively covered the cost and made you a profit.
But, apparently, in your example, you didn't do that.
Seems, you don't have what it takes to survive in a competitive environment.
[ link to this | view in chronology ]
Neil, was that english?
[ link to this | view in chronology ]
Re:
Um. That's the point with ALL of these "free" business models, is that someone is paying for the product in a different way.
As we've pointed out time and time again, a "free" business model doesn't mean people don't get paid. It just means they don't get paid directly by the customer.
[ link to this | view in chronology ]
question
It seems you assume in your model that there is a considerable population who need the product, and that the product is relatively cheap so it can be a "perk" for a finite good.
[ link to this | view in chronology ]
Re: question
As I said, this is "another" business model that involves free... not the only one. Again, the trick is merely to attach it somehow to a scarce good. For a product that only is needed by a very few people, my guess (without knowing any more about it) is that expertise on that product would be a very valuable scarce good.
[ link to this | view in chronology ]
Re: Re: question
Theres also that potentiality that most software being offered at thousands of dollars each isn't actually worth thousands of dollars each in the first place. Especially those in the hundreds of dollars range. *cough*Windows*cough*
[ link to this | view in chronology ]
Re: question
software is always free to duplicate thus has a value of $0.00
M = cost to make
DD = cost to duplicate and distribute
N = number of people who want to buy
(M + ((DD)* N))/ N
if DD = 0 then the formula simplifies to M / N
as N goes to infinit M / N goes to 0
see n mater how the much cost to make is the product should be free
and yes i speek english but i dont write for a living and dont hold my english skills up to that high a standard
[ link to this | view in chronology ]
Re: Re: question
Fair enough that you don't write for a living, but I couldn't understand that sentence at all. Presumably it's the final point of your argument, so it'd be nice to know what you were saying.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
Now, you want to, I imagine, argue this is different than wanting music for free because "it's voluntary" and "someone's paying for it." It would be notable, then, to point out that Mike is no coercing anyone to change their business models, and no one is "forcing" any artist to do anything. Mike simply points out (again and again and again) that the cost of digital music is being driven towards zero by the market and if you DON'T change your business model then someone else will, and their model will succeed where yours fails.
And again, that's the point: you make a business model that takes advantage of the infinite nature of digital music to promote yourself, like a fan-powered ad campaign. It will cost you almost nothing to distribute your music because fans will do that for you. There are costs (which are also dropping) to recording music, and these will have to be "passed along." That's where the new business model comes from, you find a way to leverage all your publicity. Traditionally, you'd go touring and make money off your performances, getting all your fans to buy finite seats for finite shows. If that's not your thing, find another way. Mike's "business model" is less of a fleshed out model and more of a "here's where the market's going, you need to adapt."
[ link to this | view in chronology ]
Re:
Michael, that's the point. I have NEVER suggested that anyone be FORCED into this model.
I am merely pointing out that if the market goes that way, then the MARKET will force them to do so. I am not saying that it's ok to infringe or that there should be a mandate requiring them to go free. I am simply saying that's where the market will go, and it's in their best interest to adopt those models.
[ link to this | view in chronology ]
Different business model? How? How long has McDonalds given away toys with happy meals? How long has car dealers given away free oil changes with the purchase of a car? How is this new or different?
[ link to this | view in chronology ]
Re:
It's different because someone's recognizing that just because a thing has inherent value that doesn't necessarily mean you can (or should) directly monetize it.
*unless you're a computer programmer yourself
**not universally true
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
Forget, if you will (if you can), all the talk about pirating. The point is not whether your fans are stealing from you or not -- and they ARE your fans if they're listening to your music, however they get it. Maybe they can't afford to buy a lot of music, maybe they're cheap, maybe they're terrorists, whatever. The point is, what's your competition doing? You aren't the only Christian Punk Rap band, after all. If they're giving away their music for free, and you're selling it, all things being equal they'll get more fans just by exposure. And having more fans means more people who are willing to buy things like t-shirts and concert tickets which *are* finite goods. Perpetuating the artificial scarity required to sell music will only end up hurting you because you are preventing people from hearing about you.
[ link to this | view in chronology ]
Re:
Extremely cheap plastics + extremely cheap Chinese labor = extremely cheap toy production overhead = happy meal covers toy cost and produces profit.
But McDonald's is able to market their cheap crap like that cause unless a friend gives you his (thus losing it himself) you won't ever get one. Its a scarce good. Music can very easily and very rapidly be copied and passed on without losing the original copies. Its an entirely different situation.
In addition, obviously in capitalism all effort comes at a measurable cost. We're not talking about free to everyone, we're talking about free for the customer.
In this model its true that I still have to provide funds to get the software, but I'm also getting a scarce good, rather than just something, I could if I desired, acquire through cheaper means.
Netflix came at the price it normally would without the software, but I still get the software. I win, they win, we all win.
yay!
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Is this page free?
[ link to this | view in chronology ]
Tying free to scarce
Crack dealers, smarter than the RIAA about business.
Although it seems odd that it's the crack needing promotion - you'd think people would need to be smoking it to listen to modern music in the first place.
[ link to this | view in chronology ]
The Toaster Model
[ link to this | view in chronology ]
Expensive software
Most software packages at huge pricepoints, especially enterprise level apps, come with extensive support services which are necessary to properly leverage the business advantages gained by using them. Expert support is a finite resource. As many commercial open-source vendors have shown, you can build an excellent business by giving the software away and charging for support.
I'm a wedding photographer and I've found that the business of selling extra prints to wedding guests has suffered considerably since the move to online galleries etc - frankly for someone who just wants a few snaps to remember the day the quality they can get by right-clicking the online image and printing it is more than adequate. Therefore I now concentrate on those goods which remain scarce - the photography service itself; the high-quality albums to which I alone (as an accredited professional) have access; high-quality, high resolution prints and so on. I have also shifted the emphasis in my pricing to those elements.
I am also about to massively reduce my online print prices to see if I can leverage the scarcity of wedding guests' time. That is - if I make it cheap enough to buy prints from me then maybe they will, simply because it's easier and quicker than doing it themselves. That way I still get to make a small profit on prints I otherwise wouldn't have sold due to online image-copying. If that works it has a knock on effect in that wedding guests who use that service will be entering a business relationship with me and giving me their contact details - possibly becoming full-service customers for me later when they get married themselves.
[ link to this | view in chronology ]
Nothing is free despite any claims to the contrary
I've yet to see a free anti-virus program offered by anyone that isn't ad based or comes with a subscription cost. In this case, I'm betting there's a subscription cost for the free virus program. Can someone confirm?
Anyway, this is the classic "bait-and-switch" when it comes to free products. Software developers will often lower the base price of the product but make up for it in other ways, such as increased costs for add-ons, subscriptions, or charge for the "help" library. There's always a price attached somewhere.
I get the gist of the article, though, but this is nothing new. This type of "buy this, get this free" concept has been around for years but I am going to insist that if market models show companies moving to a "free" product due to infinite supplies, then you can bet this company will find ways to introduce a fee structure that will recoup lost revenue.
A company can not exist making simply one product forever. Not only will people tire of this product (usually because better options become available cheaply) but it's impossible to maintain the same "design" model as technology improves.
Even your salad dressing has seen improvements. From the components that make up the dressing to the way it is packaged. But salad dressing doesn't go to the "free" level. If anything, the price is increasing.
Yet salad dressing is also "infinite" when one tends to look at the basic ingredients in it. The reason we never see it as "free" is because it contains a shelf life, meaning that it'll spoil. But I've seen plenty of "buy this and get this salad dressing for free" offers. But is my salad dressing still free?
No, it's not. It's been discounted and so has the item required for purchase. If both items are sold at $1 each retail and this offer is announced, what you're actually seeing is $0.50 for both items.
NO COMPANY can exist by giving away its products for free no matter how much spin any of these articles tries to put on it. There is always revenue exchanging hands and I don't believe it's fair that you're trying to put in people's mind that free does exist.
No, it doesn't. It never has and it never will.
Note: Here's a tip that the software isn't free. Go to the store and walk out with a copy of the software without paying.
Let's see how far you get because this software is "free".
[ link to this | view in chronology ]
Re: Nothing is free despite any claims to the cont
They charge for company licenses.
[ link to this | view in chronology ]
Re: Re: Nothing is free despite any claims to the
[ link to this | view in chronology ]
Scams =Trial Pay
Here's my 'FREE' result's:
Zone Labs removed the smaller security system and it's firewall from my computer and locked up -until I could prove I had brought some free stuff from another company equivalent to the price I had previously intended to pay for Zone Labs bigger Security Suite. That took three days to figure out what the hell happened to my computer and why I couldn't get online. Price $60.00.
Then it took 5 days for the other company Columbia House DVDs -to tell Zone Labs I really did spend the money to buy a few shi**y DVD's. Price $40.00.
Ao now I'm out over a hundred dollars, have a few shi**y DVD's and still no Zone Labs Security Suite.
TrialPay and Zone Labs say "WTF"?
And then BAM, more shi**y DVD's start pouring in through my new membership in Columbia House!
When I say "STOP!" Columbia says "EAT IT!" And then charges my credit card another again -for a cancellation fee.
Price $67.00.
I'm sure they're all having a nice dinner with my 167.00 - while I still to this day have got nothing of what I originallly asked for.
And "customer service"? Not even from Zone Labs have I been given an honest answer.
[ link to this | view in chronology ]