The economics of giving it away

Tough time calls for questioning!....especially in a period when ‘free’ goods and services online are becoming more and more popular…what are the challenges that entrepreneurs & business leaders face today ? Why the ‘zero-sum’ model doesn’t work alone?

How to monetize services when you are operating in a ‘freemium economy’- An economy where ‘few’ pay but ‘many’ use?. Imagine would some of the larger web 2.0 companies be around if it wasn’t for free services. Would consumers pay for Facebook, MySpace or Digg? I think the answer in most cases is ‘no.’

I think online businesses will have to look at providing real value to the users. Paid subscriptions can work only where there is true additional value provided. (LinkedIn is a good example)

So with the changing marketspace, Web startups now are having to comeup with a business model that brings in real money while they are still young.

Chris Anderson has a very interesting take on ‘the economics of giving it away’. He talks about the rapid shift in business model (mostly online) and why now ‘cash-flow’ is the king. I think this is a good read for anyone interested in online space. Chris has an advice for all would be entrepreneurs – ‘it’s now time to innovate, not just with new products but with new business models’.

Read it, leave your comments. Also refer to my previous post on ‘FREE’