There is no such thing as a free lunch. This adage may be as old as time, but it is just as true today as it ever was. In a business model, if someone receives something for free, someone else is paying for it. The ‘free’, multi-sided platform has been a game-changer for businesses over the past five or so years, upending conventional methods of transactional behavior.
In a free business model, a sizable customer segment consistently gains from a free offer that is paid for by another component of the model or customer segment. For instance, RealEstate.com.au is a website where people can browse and apply for free listings of houses and apartments for sale and rent. Real Estate Agencies are charged a fee to list their properties on the website.
However, the “Freemium” model—where you get the bare minimum for free and pay for the full version—is the most well-liked and alluring of these. The free offer is frequently offset by having paid advertising that is shown to users as they use. Because there is no risk involved for the customer to try the product, it is quite effective for marketing Smartphone apps and software to the general public. This increases uptake, and once the customer enjoys the features, they will continue to use it. Either users purchase the full version or advertising revenue results as a result. Customers are now beginning to change their behavior after years of being quite content to use the free versions.
Consider Spotify, the well-known music streaming platform. It provides users with free, instant access to almost all music tracks, artists, and podcasts. If you don’t mind an occasional advertisement in between your playlists, you can use it for free. Or even YouTube, which offers limitless free access to video content that you can watch and get lost in, but be ready to sit through advertisements at the beginning and pop-up banners throughout.
That’s all well and good, but the market trends are beginning to change once more as a result of the overabundance of advertisements that are now present on all of these platforms, which are seriously compromising the usability and customer experience. People are starting to appreciate the value of ad-free subscriptions because they allow them to enjoy all the advantages of the product without being bothered by interruptions and distractions from ads. As a result, customers are now choosing to pay the monthly subscription fee in order to receive the premium benefits rather than just putting up with loud, jarring advertising in the background of their music streaming at the gym.
This is a noteworthy change for marketing because just a few short years ago, the customer would be pleasantly surprised by getting a service for practically nothing. Because not charging customers for a product was novel, it surprised marketers and organizations. However, after years of this, the average person is getting tired of the extrinsic, non-monetary costs associated with their free use, and businesses are now seeing a demand for ad-free versions. This paradigm shift was made possible by most digital products and some innovative physical ones, and it was highly profitable. This indicates that the typical modern customer, who is quite used to not paying, is now learning to pay again because the “cost of free” is reducing their utility.
What an absurd, perplexing, and illogical statement! It is occurring, though, nonetheless.
To be honest, it’s not like the cycle has exactly reversed to how things were before the free trend; all industries are witnessing improvements in how customers interact with and use these products. For instance, it’s not like people are paying $30 for a physical CD once more when it comes to music. The music industry as a whole and how consumers consume music have changed from free to subscription-based, ad-free streaming. This appears to be the current, widely embraced trend that is being embraced on a global scale.
Ad-blocking programs are another threat to the Freemium business model, particularly on social media sites like Facebook and YouTube where these “cheating” users get all the benefits without having to “pay” the price of advertisements.
It’s an intriguing trend, and it will be fascinating to see where creative minds will take organizational models in the future.
âWhat are your opinions?