Wednesday, January 07, 2009

Alternatives to the Ad-supported Business Model

Image courtesy CalCent via stock.xchng There are many businesses in Austin leveraging online services. Many of these might be classified as Web 2.0. These might be using the ubiquitous "Freemium" model, in which some level of service is given away, and more advanced features require you to subscribe. Others are targeting an ad-supported model. Still others are building "Honeypots" which draw people into a community, providing a business access to qualified patrons to which goods and services can be sold. Bootstrappers aren't shy about mixing models. I'm sure there are artists, film makers and chefs using some version of these business approaches.

I always struggle with how these models can be applied to make a growing, thriving profitable business. At the heart of these business models is that they are FREE, and often that is the value associates with them. It's hard to beat "free" even with a great premium offering.

So, I was delighted to discover Kevin Kelly's manifesto "Better Than Free" on Kelly lists eight "generatives," which he defines as "a quality or attribute that must be generated, grown, cultivated, nurtured."

How could these be applied to our Bootstrapping entrepreneurs?


In my post The Superstitions That Keep You From E-mail Success, I use the example of American Airlines, that sent me five emails in one day. Was this SPAM? No, these were telling me the status of my flights for the day. The information arrived just when I needed, and the frequent e-mail was welcome. What is timely about your business offering? How could you use e-mail or SMS to communicate immediate information to your customers? Would they pay for it? I will always check AA prices due to this feature, and maybe even pay a premium for a flight.


What does your business know about it's prospects and customers that would allow a customized information or service? Adding a name to an e-mail is not the kind of personalization Kelly is talking about. It's the conversations between your business and your customers that generates the value. In other words, part of the value is in the asking.


How can you expand on what a customer already knows? For example, if you had a record of a salesperson's expenses, what could you tell them about how they're spending money? Could you tell them which of their clients was most "expensive" to sell? Could you tell them which industry segments are "cheapest" to close?


People pay a premium for a brand, because they can make assumptions about quality and value based on their experience -- or others reported experience -- with the brand. Most small businesses don't have the marketing cash to build authenticity into brand. Kelly talks about a reverse watermark strategy for artists: Use a watermark to brand your image as "authentic" implying the highest quality. It's like the bumps of paint that make you know a painting is the original. How can you turn content "protection" schemes into content "authentication" schemes?


How can you give customers access to information when they need it and in the form they need it? Local company Dwellgo offers real estate investors access to properties that may not be available through the listing services, and buyers access to investors that real estate agents may not even consider. It's the access to the information that provides value.


How can you make what you offer more valuable based on its context? A movie downloaded from the Internet isn't going to have the same effect as one watched in a movie theater. When you add the context, you are essentially adding a body to your offering -- embodying it. I think this is why books continue to be successful ways to communicate. It provides content that could easily be digitized in a format that appeals to us at certain times in our day.

Molecular Thinking provides a context for something that could otherwise be easily copied and distributed for free: ideas.


Kelly states, "The elusive, intangible connection that flows between appreciative fans and the artist is worth something." Letting your loyal customers get close to you or your business increases their value of ownership. Businesses have been using invitation-only events, customer conferences and "closed" parties to generate patronage value.

Read Kevin Kelly's manifesto and see what ideas come to mind for your business, especially if you generate content that is digital or can be digitized. You may find some interesting new approaches to marketing and designing profitable models.

Please share your insights in the comments.

Brian Massey is a long-time member of the Bootstrap Network and owner of Conversion Sciences. He blogs at The Conversion Scientist.


Grant Headifen said...

And then there seems to be a hybrid. What I've done at is to build brand and value by charging for the online sailing courses it but to give away a smaller free course to show the quality. My conversion rate has gone up 35 times since implementing the free course.

Brian Massey said...


I'd wager that this strategy is an example of Accessibility; you're giving them access to training, which is valuable. They get the small course for free, but then they must pay for additional course accessibility.