Site   Web

February 11, 2016

The Free Business Model

We are all consumers. Whether we consume products, services, or content, at some point, we all consume. Our method of consumption might change over time, but the reality is, consumption never ends. Consumption does have a limit – money. Yes, our resources (money), not our desire, limits consumption.

When faced with limitation, how do we choose? Cost, perceived value, desire, and enjoyment level are the most common factors. However, when ‘free’ is involved, this can reduce the impact of these factors. Free enables fulfillment of consumption without limitation or rather without a perceived cost.

‘Free’ brings us e-mail, enables us to share photos, allows us to watch videos, and provides us a medium to communicate ideas, to name a few. However, free does come at a cost: time. It takes time to create profiles, to create content, to share, view, and compose content/communications. We also spend considerable time understanding and learning the plethora of free offerings available.

Our freely invested time invariably turns into dependency. Our time spent without a second thought results in a dependency upon the service or offering.

Why does dependency matter? Well, in dependency we give the service provider a level of control. Also, now we say ‘yes’ to offerings we would have said ‘no’ to BEFORE the dependency; YouTube, a perfect example.

YouTube offers a free medium to share video and audio content. We as consumers do not pay for YouTube – it’s free and has become the standard platform in North America as a result. To see a video, or upload or share a video, most people use YouTube to the point it has become a verb. Side note: when a service offering becomes a verb, a dependency has been built around the service.

Recently, YouTube introduced two changes:

1. Videos automatically move to the ‘next’ recommended video. This increases content consumption AND YouTube conveniently controls which next video is recommended/suggested. Often sponsored content drives that recommendation.

2. Advertisements now appear not only at the beginning of the video, but also in the middle of the video as well.

This works out to a cost of 15 to 30 seconds of your time at the beginning of a piece of content as well as sometimes 15 to 30 seconds of your time in the middle of the content.

While subtle, payment has officially begun: we are now paying with our time. Impressive how cleverly YouTube orchestrated this dependency and payment:

• Free access

• Content controlled and provided by users

• Easily accessible via mobile

• Apps automatically added to the very first revolutionary Smartphone: the iPhone

The No. 1 search engine in North America – Google — purchased YouTube.

So what are the takeaways of ‘free?’ In the above YouTube example, watching advertisements is now required (paying with our time). Ironically one of the reasons people moved to the Internet in the first place was to avoid advertisements and commercials on TV channels.

Also for YouTube’s mass audience to reject these policies and switch to another platform would require a superior ‘free’ service offering matching YouTube’s functionality and mass adoption, AND have the SEO to be consistently ranked at the top. Remember Google controls the ranking for North America. An almost insurmountable possibility.

Should YouTube be compensated for its excellent service offering? Yes. Is its approach wrong? Well it’s legal. Does YouTube’s approach prevent the consumer from knowing the actual cost of the offering until it’s too late? Yes.

Here’s the question for each person to ask: Is free worth it?

On a personal note, I enjoy Google and YouTube service offerings, daily and weekly respectively. This article highlights an important underlying idea and was not meant to isolate Google or YouTube. Free has a cost and Google and YouTube illustrate this cost brilliantly. All ‘free’ offerings require a slightly different payment, not all replace money with time as a currency. Interesting concept to ponder…

Stay tuned for part two: free from the business perspective and the opportunity for monetization.


Christiano Ferraro is a management consultant serving the start-up and small to medium-sized business community with more than 10years of sales success in technology including software sales, SaaS, and telecom. Christiano is a firm believer in consultative sales methodology as a strong sales foundation. Past sales divisions include: new business development, key account development, channel sales and VP sales.