Source: https://www.forentrepreneurs.com/power-of-free/
Further Reading: https://www.wired.com/2008/02/ff-free/
In the age of abundant capital and VCs chasing ‘Growth at any cost’ it might seem that giving away products for free is NOT a viable business model. However, there is method to the madness when firms give their products free. The reasons for going free are:
- Reduce the expenses on sales and marketing by gaining users through viral effects (word of mouth, referrals, etc.)
- Gain market share and monetize the customers later
- Leverage engineering resources to create features that make the products more valuable
Three business models built on top of free products that come to mind are:
- Freemium Model; Where customers get basic features for free and pay for the premium features
- Advertising; Monetizing existing customers by advertising
- Cross Sell; Sell another app/services to users of the free app/services
It would be interesting to see which industries in the future are disrupted through the ’Power of Free’.