Free is King on the Internet

Published 06/25/2012

With the recent Facebook IPO and its subsequent stock decline, the concept of driving revenues from the Internet has come under question. The main driver of revenues for Facebook is its advertising. Is it possible to build a company as large as Facebook and not really be driving profitable revenues from advertising?

Certainly there are companies out there who enjoy great success with their highly targeted, pinpointed ads using this and other social media channels.  Recently, I Googled “shoes,” visited Zappos.com, and just about each time I go on Facebook since then, an ad pops up for Zappos. Coincidence?  Not!  Once, an ad popped up for Ugg Boots that had my age and city of residence in the ad. It said something like “35-year olds in Pawtucket love Ugg Boots.” (OK, so I lied about my age just now, but it’s not important to the story!)

Targeted, pinpointed advertising certainly has a place on the ‘Net. Our clients are experiencing huge gains with the strategic Google Adwords campaigns we’ve launched for them. It looks like advertising will remain the model for Internet-based companies to haul in the revenues, but subscriptions are another story.

I venture to say that no one wants to pay for content or access on the Web. Facebook, Twitter and LinkedIn, for example, all have free “basic level” membership access, but few social media surfers take advantage of the premium level memberships that are available. How many people do you know pay for LinkedIn? With billions of people surfing the Web and social media channels by the minute, you wonder how much money could be gained even if everyone paid just one dollar for their membership fees? Hmmmmm……

As we know, with marketing, whatever model comes out of the gate first is the one that sticks. ‘First to market’ (or sometimes the ‘largest marketing budget’) wins in terms of branding, name recognition, etc. Think “Kleenex” when you reach for a facial tissue. So, when the Internet began to claim its place in the world of business, ‘free’ was king. It still is. Newspapers have tried to charge for content, but too many sites like Wikipedia and others satiate our thirst for free knowledge. We had a client that tried to compete locally with Craigslist, only to find that no one wanted to pay to list their merchandise for sale when Craigslist offered the same or better reach for free.

Yesterday, Kraft Foods announced the introduction of a free recipe/shopping list app instead of just offering the 99 cent one it had in the marketplace. The result?  Three times the amount of downloads for the free app! They play to retain their 99 cent app for offering ‘premium content’ but the point remains clear: no one wants to pay for anything on the Internet.

If you have a choice of a free app or the 99 cent one, which one do you download? My guess is the free one at least initially, to see how you like using it and then perhaps you’ll upgrade to the for-pay one. Word to the wise to marketers offering premium content: make sure it’s truly special to be worth the download. Even though we’re only talking small dollars, remember that consumer expectation is high because we’ve trained them to expect everything for free.

Here at Newberry PR & Marketing, we’ll continue to watch and learn all that we can about the relevance of the various online marketing opportunities for business, and will model appropriately for our clients.

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