공짜 경제에서 어떻게 돈을 버는가?(How to Make Money in Free Economy)
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Prof. Sangkyu Rho discusses how to make money in a free economy. He explains that while some think information goods have no value due to zero marginal costs, there are still monetization opportunities through cross-subsidization models where some users pay to subsidize free users. Key strategies for information goods include versioning products for different market segments, bundling, and involving third party payers through advertising or sponsorships to capture value despite zero marginal costs.
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공짜 경제에서 어떻게 돈을 버는가?(How to Make Money in Free Economy)
- 1. 공짜
- 2. 경제에서
- 3. 어떻게
- 4. 돈을
- 5. 버는가? (How to Make Money in Free Economy) 2015. 4. 6. Prof. Sangkyu Rho Graduate School of Business Seoul National University http://www.slideshare.net/srho/how-to-make-money-in-free-economy
- 6. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Who’s Sangkyu Rho? • Profession: – 서울대
- 7. 경영대
- 8. 교수
- 10. 경영대
- 11. MBA부학장
- 12. from 2013 to 2014 – Blogger since 2013 • Interests: – Data Knowledge – Social Network • Contacts: – srho@snu.ac.kr – www.organicmedialab.com – Facebook: sangkyu.rho – LinkedIn: Sangkyu Rho – Twitter: @srho77
- 13. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School How to Make Money Google,Amazon, Facebook, … • 0.000…1 × ≈∞ = Big Number Reality • 0 × ? = 0 Solution • Revenue (Monetisation) Model: What part of product/ service to charge to whom, and how? 3
- 14. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 4
- 15. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School “Information wants to be FREE” 5 Economic Zero marginal cost (MC=0) All Information No value at all in some cases SNS with 0 users Social Free sharing Wikipedia Free copying Piracy Psychological Free as anchor prices Free app vs. $1 app Strategic Free as weapons Kakao Talk
- 16. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School How is Free Possible? Cross Subsidization (교차보조) • Someone is paying for me. • “There ain’t no such thing as a free lunch!” 6
- 17. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Cross Subsidization 7 To From Example Free Product Paid Product 미끼 상품 (Loss Leader) Free Now Pay Later 공짜폰, 무료 체험(Free trial), 부분유료화(Microtransaction) 게임 Free Users Paying Users Freemium(Evernote), Pay WhatYou Want (Radiohead) Free Side (Party) Money Side (Party) Traditional Media, Google Search Free Market Non-monetary Market Gift Economy (Wikipedia, Linux), Barter Economy (Google 411) http://organicmedialab.com/2013/04/30/there-is-no-free-lunch/
- 18. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Free as a Strategy 8 Free (무료) Money (유료) Experience (체험) Network Effects (네트워크 효과) Reputation (평판) Scale (규모) Device/Platform (기기/플랫폼) Consumption (소비) Attention (방문) Organic Media Lab, 2015
- 19. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Information Goods(정보재) Anything that CAN be digitized: • News, Music, Movies, Books, … • Operating Systems, Productivity Software, … • Social Network Services, Market Places, … Value not in the container but in the contents, … and contexts 9
- 20. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 3 Components of Media 10 http://organicmedialab.com/2013/03/21/3-components-of-media/
- 21. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 정보재의 특징 Marginal Cost (MC) of Information is 0 Information is Soft Information is Experience Good Piracy of Information is Inevitable 11
- 22. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Issues in Information Goods Transactions How to package information goods How to price information goods How to promote information goods How to manage intellectual property rights 12
- 23. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Free or Not for Free? Free as a Strategy Value-based Pricing Versioning and Bundling Help from Potential Customers Maximizing User Experience 13
- 24. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Marginal Cost of Information is 0 14 Quantity TotalCost/Revenue Cost of Information Goods Cost of Physical Goods Revenue Q* Organic Media Lab, 2013
- 25. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Implication of MC = 0 Free version Unlimited supply Economies of scale NOT Cost-based approach, BUTValue-based approach 15
- 26. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Value-based Pricing Forget cost per unit when MC=0 Focus on value (revenue) maximization Learn users’ willingness to pay by experiments • Versioning bundling • A/B tests 16
- 27. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Economics ofVersions and Bundles Goal:Value Maximization Price discrimination [Pigou, 1920] • Personalized pricing (Perfect) • Group pricing (Direct) • Versioning (Indirect) 17 Quantity Demanded Price 10,000 20,000 10,000 20,000 Organic Media Lab, 2013
- 28. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Versioning Different versions for different market segments • Offer versions tailored to the needs of different customers (e.g., quantity, quality, functions, capacity…) • e.g., Cable TV, Freemium (Free + Premium versions) • How many versions? 18
- 29. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Quantity Demanded Price 10,000 20,000 10,000 20,000 Organic Media Lab, 2013 Group Pricing A different price for each group (e.g, Student versions) Why? • Price sensitivity • Network effects • Lock-in 19
- 30. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Personalized Pricing A different price for everyone • Know your customers • Personalize your product • Differentiate your prices when possible e.g., Google Adwords 20 Quantity Demanded Price 10,000 20,000 10,000 20,000 Organic Media Lab, 2013
- 31. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Bundling A special form of versioning in which two or more distinct products are offered as a package at a single price. (e.g., Microsoft Office,Amazon Prime) Bundling increases the value extracted from the customers by reducing the dispersion in their willingness to pay 21 Word Excel Cheolsoo 150,000 100,000 Younghee 100,000 150,000
- 32. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Revenue Models Packaging • What to pay for Payer • Who’s paying? Pricing • How (much) to pay • When to pay 22
- 33. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Revenue Models of Music 23 Packaging Payer Pricing CD 10 songs Consumer $ 10/CD iTunes 1 song Consumer $1/song Melon All you can eat in a month Consumer $5/month Spotify All you can eat Advertisers $15 CPM
- 34. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Packaging (Versioning) Fragmentation • Individual songs (Apple iTunes) • Microtransaction games (Nexon Maple Story) • Selling the parts (e.g., Ringtone,Amazon AWS) Versioning • Freemium (Evernote, Hulu, even Microsoft Office) 24
- 35. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Packaging (Bundling) Bundling • Office Suite (Microsoft, Google Apps) • AllYou Can Eat (Netflix, Spotify) • Mixed Bundle (Amazon Prime) Extension • Add service (Apple iPod + iTunes) • Add product (Amazon Prime + Kindle Fire) 25
- 36. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Pricing Subscriptions • Video rental subscription (Netflix) Rentals • Kindle Owner’s Lending Library (Amazon) Dynamic Pricing • Auction (Google AdWords) • Pay WhatYou Want (Donationware) 26
- 37. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 3rd Party Payer (Advertising) Container: • Newspaper — TV — PC — Mobile • Text — Image — Audio —Video Contents: • Commercial — Infomercial — Information Context: • Irrelevant/Independent — Keyword — Social Network — Location — Activity — Intention 27
- 38. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 3rd Party Payer (Advertising) Performance: • Impression — Click — Sale Participation (Mediation): • Passive — Interactive — Active — Money Making(?) 28
- 39. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School 3rd Party Payer (Sponsorship) Product placement Contents sponsorship Crowd Funding 29
- 40. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School “Information wants to be FREE” 30
- 41. (CC BY-SA 3.0) Sangkyu Rho, SNU Business School Recommended Readings Chris Anderson, Free, Hyperion, 2010. 윤지영, 오가닉 미디어, 21세기북스, 2014.( http://organicmedia.pressbooks.com) Shapiro Varian, Information Rules, Harvard Business School Press, 1999. Saul Berman, Not for Free, Harvard Business Review Press, 2011. 31
- 42. Any Questions? srho@snu.ac.kr www.organicmedialab.com Facebook: sangkyu.rho LinkedIn: Sangkyu Rho Twitter: @srho77