You Don't Need To Make Money From Every Person Who Enjoys Your Product

from the it's-called-advertising dept

One of the points of contention we sometimes have with those who disagree with us about the role of free in a business model, is how you deal with the issue of "freeloaders." People often respond to our posts on business models that use free to point out that many people who get the content will never pay, and thus the business model is somehow a failure. Amusingly (and, perhaps, tellingly), most often these sorts of comments come from individuals who insist that they, themselves would never pay -- and basically suggest that copyright and artificial scarcity is necessary to protect artists from folks like themselves. But that's missing the point, entirely. The point isn't to get everyone to pay. In fact, it need not be to get the majority of folks to pay -- it's to build up your audience so that it's big enough that when you offer a scarce good of value, enough people do pay for that good. In such a world, the "freeloaders" aren't a problem -- they're simply providing free advertising.

Another way to think about it is that BMW creates some entertaining advertisements -- and plenty of people enjoy those ads without ever buying a BMW. Yet, those same people don't complain that folks who watch BMW ads without buying a BMW are "freeloading" off of BMW -- despite the fact that they are. Instead, they understand the nature of advertising is that not everyone buys the product that's actually for sale. In fact, a very small number of people may actually buy the product, but that's okay. It's not freeloading, it's just the nature of a promotion.

Cory Doctorow has taken this concept a step further in explaining yet another reason why micropayments aren't the solution for content online:
I don't care about making sure that everyone who gets a copy of my books pays me for them -- what I care about is ensuring that the everyone who would pay me decent money for a book has the opportunity to do so. I don't want to hold 13-year-olds by the ankles and shake them until their allowance falls out of their pockets, but I do want to be sure that when their parents are thinking about a gift for them, the first thing that springs to mind is my latest $20-$25 hardcover.
We've long pointed out plenty of reasons why micropayments aren't a real solution for the "online business model" question surrounding content, with most of the focus being on the mental transaction costs, and the fact that competitors will always beat micropayment solutions by eventually embracing business models using free, but Doctorow makes another good point about the failure of micropayments. Beyond the reasons we've discussed in the past, micropayments also focus too much on shaking the pennies from every passing individual, rather than recognizing the real win is in getting someone else to spend more on a bigger scarce product down the road.

Filed Under: business models, cory doctorow, freeloaders, micropayments, promotion

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  1. identicon
    Mark Murphy, 9 Sep 2008 @ 11:39am

    Re: Re: Re: Always talking free let's put it to the test

    I see this site as little more than a non stop rant about how current copyright and patent laws are "hurting" everyone, and how the music industry is hurting musicians and how their business model is outdated etc...

    If you think this blog is a rant, try the Bile Blog ( In other words, I think you need to reset what you consider to qualify as a "rant".

    I don't see content on here that anyone would be willing to pay for let alone be worth anything other than a laugh.

    You are certainly entitled to your opinion. It's a big Internet, and presumably there are other places that are more in line with what you would prefer to read.

    However, Mr. Masnick is fairly well-regarded. I see him quoted and linked to from quite a few blogs and sites that I read. He's been cited by everyone from PBS to BusinessWeek, appears at conferences, and so forth. By comparison, you and I are nobodies. So, while he may not be your cup o' tea, please understand that there are a fair number of people who disagree with you.

    As far as his incentive, gee he makes a non stop babling rant about how all this works but only offers up an occassional success at free, and in my opinion even those are rarely a true success, but rather only a success because the artist is willing to settle for much less than the true value of their work.

    And as soon as you find the galactic taxi meter that indicates "the true value of their work", be sure to let us know! I, for one, would relish the ability to absolutely and indisputably know the value of a book, article, or whatnot just by pulling a lever. Most of us are limited to just finding out the value we are able to extract by the means we choose to extract it, without the benefit of your precise and true calculations.

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