The Many Versions of the "Free" Business Model

There's been a lot of buzz of late regarding the use of "free" in business models. With Chris Anderson's recent book Free, and the ever popular "Freemium" model among internet marketers. And let's not forgot the troubles that many publishers are having reconciling their decisions to offer their content for free online. What I've witnessed is a lack of distinction between different uses of free in business models, and some folks jumping to the conclusion that just because there's a free offering, that it must be some new phenomenon.

Don't get me wrong, the Freemium model is a very valid and compelling model in my opinion.  I'm just pointing out that not all models that incorporate free are Freemium.  Here are a couple of examples...

Free, like a Metro newspaper
No surprise, free newspapers that you can pickup in the subway or around town are advertising supported. The "money flow" in the business (advertisers paying publishers) is disconnected from the customer base (the readers). More readers does indeed boost advertising revenue, but there's no effort in this model to extract cash from readers.

Free, like Twitter
Many internet companies offer free services, such as Twitter and Facebook. In addition to advertising (like the example above) these companies are looking to leverage their audiences by charging businesses for use or exposure to that audience. Again, the customer base is not being asked to pony up cash. (and this isn't to say that these guys won't go the Freemium route later, or that they have no business model).


Free, as in Freemium
Free in this model is used as a "tasting" that leads to a portion of the userbase upgrading to the premium version. This is one way that LinkedIn makes money. They offer a great service that needs lots of users to sign-up in order for their model to work (which is another reason to offer a free service - their model wouldn't be too useful if there was no one in your professional network) and a portion of the users pay for their premium offering.

So, if you're thinking about applying a marketer's favorite word ("Free") to your business model, make sure you have a clear understanding of the different versions and implications of free business models.

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Pair Programming: An Interesting Model

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I read an article by the NY Times Online this past weekend and it really resonated with me. It's all about "pair programming" where two software developers work side-by-side, one as the "driver" and the other as the "navigator". Here's how the author defined it:

One person does the actual writing, or coding, and the other person checks it, corrects it and offers suggestions as it's being written. Programmers, or software developers, refer to these roles as driver and navigator.

At first, as the author points out, it would seem that this is two people doing the job of one person - and thereby an inefficient use of human resources. But as it turns out the end product is of such a higher quality that less resources are spent later in fixing bugs and such.

And it got me thinking that there are a lot of disciplines within business that could benefit from this concept. Quite often we work on our own to "develop" business plans, sales strategies, marketing objectives, or product roadmaps.  So, pair programming is just the implementation of the collective intelligence (a.k.a., "two heads are better than one") making these end products better.

But this shouldn't be taken to the extreme, otherwise you end up with "death by committee".  That would be taking collaboration too far because too many voices restrict the flow of innovation unless strict discipline is enforced. I think creative juices flow better when there are just a few people involved at a time and they recognize that it's an evolving discourse; you don't need to have all the answers going into it.

You also don't look so foolish when you're thinking out loud if there's someone else in the room with you.  :-p

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How I Use Twitter

Image via CrunchBase

I follow interesting people and not so interesting people (some of my friends :-p ) on Twitter.  I won't get into a whole explanation of what Twitter is over here. If you don't know, get a quick education on their site and at oh, about a million other places on the web.

People use a lot of different third-party applications, on their desktops and on their handheld devices to participate in Twitter.  I've tried a bunch, and this isn't intended to be a review of any of them, but more so a peek into how I use Twitter.

Shocking as it may be to some of my geeky friends, I actually use SMS on my BlackBerry to follow the most interesting Twitter conversationalists and friends. It's just a handful of people and brands that I follow in this manner. However SMS is probably by far the most common way that I post tweets to Twitter.

I have TwitterBerry and TweetCaster on my BlackBerry, and use them mostly to pick up @messages. Still not sure which one I like better. The later is more feature rich, but the former is more responsive as an app.

I've stayed away from the third-party apps on the desktop because I know they would immediately consume more of my time than I'd like. So I check in once in a while, taking a sip from the hose, on the Twitter website itself.

Now, that's mostly the mechanics of how I use Twitter. I actually use it to hear about interesting news from the people that I follow and click-through to the interesting things they've written and discovered on the web.

I use it to discover interesting articles linked to by the people I follow.  And as a way to easily communicate with friends and colleagues.

To me, the most powerful aspect of Twitter is the professional implications - and maybe that's why their recent valuation was at $1B - money in them thar hills.  I use it to find professionals that I need to reach for my job. LinkedIn is a powerful tool for finding WHO the people are at a particular company, but you can't easily communicate with them on LinkedIn (unless you pony up the cash for their premium account). On Twitter, you can communicate with them - albeit in public - but it's just a conversation opener.

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Chasing Your Competiton = Suicide

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It's widely accepted that you should never say that you have no competitors when giving a presentation to investors or business professionals. The theory goes that if you're the only one who has thought of this idea, or similar ideas, then it's probably not a good idea. Some form of competition validates what you're doing.

But that doesn't mean that you should spend too much time focused on what these competitors are doing. I think you should be aware of what they're doing, but never let their actions and features inappropriately drive your strategy. If you do, you're just a copycat - a follower instead of a leader.

And chances are you're not doing or planning the same exact product or feature-set as these "competitors". You must be doing something unique and innovative, otherwise where's the value in what you offer? So, you'll want to do it differently than your competitors IF you want to do it better.  Reminds me of this quote (attribution unknown):

"Different isn't always better, but better is always different."

And if you're doing is differently (and hopefully better), then you should not be copying your competitor. That's just lazy and closed-minded.

Irritate, Innovate, and Iterate

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I recently said this to someone in regard to product design, and I'm not sure if it's original or not. But it hit the spot:

You don't have to pay attention to the details, just don't be surprised when your competitor does.

I think it's really important to nit pick - to find things that could be improved upon, even if only marginally. Doesn't every little bit count?  Focusing on little things may sound trivial, but little changes (especially in the copy text and UI of software used by thousands or millions of users) can make a big difference.

And what does it say about your company if your product clearly shows a lack of focus on the details? Don't get me wrong, sometimes we only have the resources available to address the "big issues" and focusing on the little one's is irritating. But innovation doesn't always involve big ideas and big plans.

The Personal Advisory Board

Jeremiah Owyang tweeted this earlier today, and it got me thinking......the premise here is that the individual gets advice and the adviser gets something in return - what Jeremiah calls the "equity". This is analogous to the corporate advisory board where advisers receive equity or options in a company in exchange for their advice. So, what is this value that the personal adviser receives?

First, I think we need to look at the value that the individual setting up a personal advisory board gets.

What I've found to be the most powerful force in the personal advisory board structure is accountability. It's an interesting phenomenon, that the individual who creates a personal advisory board gains more from just having someone (or a team of people) to "report to" than from the advice they might receive. It's like that old adage about writing down your goals. If you don't write them down, you're less likely to achieve them. The same is true here.

By just having a "personal advisory board", you will achieve what you set out to accomplish more times than not.

That's because you will be more realistic about what you can achieve when you have to say it out loud to those that you respect. Additionally, you're more likely to succeed at your goals when you know that failure means having to justify to others why you failed. Self-justification is easy. Facing up to others is hard.

Image by lunaweb via Flickr

And so the "equity" for the adviser is really just the satisfaction of seeing a friend or a respected colleague succeed. It doesn't require a lot of time and resources to be a "personal (accountability) adviser"; you just have to "be there" for them - a listening ear. And to me this means that the kind of personal adviser that one should seek out should be someone they have a good relationship with - because these are the people that want to help. And they're the ones that gain value (aka equity appreciation) in helping others.

On a related note, I find that many of the "social tools" that we use online are an extension of this accountability factor. Your "social graph" is in many ways your personal advisory board.

Imagine how accountable you would feel if you tweeted your goals. That's the power of "social media". Give it a try. Tweet your #goals. Your advisory board is listening.

One of my Favorite Non-Profits: PCRM

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I'm really excited about Zemanta's new campaign to raise awareness and funds for the non-profits that bloggers care about the most. Corporate sponsors have provided the cash, and Zemanta is giving the money away to the non-profits that are blogged about the most over the next few weeks.

Details are here: Blogging For A Cause, by Zemanta

And so, I thought I'd put in a plug for one of my favorite non-profits, Physicians Committee for Responsible Medicine. They publish the handy Vegetarian Starter Kit pictured at the right. Putting 2 + 2 together, you're probably not surprised to hear that they're medical doctors that advocate a vegetarian diet. I think the science is very compelling. Here's a brief description of them:

Founded in 1985, the Physicians Committee for Responsible Medicine (PCRM) is a nonprofit organization that promotes preventive medicine, conducts clinical research, and encourages higher standards for ethics and effectiveness in research.

Please do your part by blogging about your favorite non-profits. It only takes a minute, but the great feelings last a good long time.

This blog post is part of Zemanta's "Blogging For a Cause" campaign to raise awareness and funds for worthy causes that bloggers care about.

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About Blue Venture Community

[This was a test post I did while doing a live demo of Zemanta for the Blue Venture community Meetup on March 10, 2009]

Blue Venture Community (BVC) is a private community for Columbia students, alumni and employees interested in all aspects entrepreneurship. The group welcomes members from any school, sector or industry function (e.g., entrepreneur, VC, lawyer, etc.).

Image via Wikipedia

BVC seeks to foster entrepreneurship by facilitating communication, providing access to resources and creating community. Through BVC members meet every few weeks to participate in an array of events. Event formats include idea incubation, demo events, educational panel and speaker events and happy hours.

Individuals must possess a Columbia email address to join.

This group is a privately operated group not affiliated with Columbia University.

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Stuff You Don't Get Paid For

This post is about the work entrepreneurs do for free.

It's easy to hoard your knowledge, shield your contacts, or be resistant to helping others unless you're compensated in some way. It's human nature to want to know "what's in it for me?"

But the truth is, we live in a world of abundance, not scarcity. If everybody came to the table asking, "wha-jya get me?" then no one would get anything. If, however, everyone came to give, all would receive.

Sharing and helping others will benefit you by demonstrating your worth and goodwill. The beneficiaries of your advice and support will want to return the favor. At worst, you'll be known as a facilitator (nothing wrong with that). At best, you'll have a large network of people that are ready and willing to help you.

I look at this unpaid work as the price of entry.

Another instance where we end up working for free is when we take risks, such as starting a company - and end up having to shut it down for any number of reasons. It's easy to be angry, disappointed, and embarrassed by this failure. But to move forward, we need to learn from our mistakes and the forces beyond our control.

I look at this unpaid work as the cost of an education.

Zemanta - A cool blogging tool

I'm writing this piece to test out a new blogging plug-in - well, at least it's new to me. I think Image via CrunchBasethey've been around for a year or so. It's called Zemanta and it recommends articles, pictures, tags, etc that are related to my blog post as I'm writing it. It just proposed that I link the word "Zemanta" to their website. I didn't have to leave the browser window that I'm in, and I didn't have to type out the URL.

And I just dragged in that image of their logo. Pretty cool stuff.

I had heard about these guys - vaguely - from reading various tech blogs. But it caught my attention when Albert Wenger at Union Square Ventures (USV) told me about them. USV invested in them a while back.

They integrate nicely with Blogger and just about every other blogging platform out there.
I recommend you check it out.