Local Interactive Strategies

The new entry-level price: free

A few recent events reinforce a theory I’ve been noodling over for a couple of years: the new reality for anyone trying to build a business in the digital world is that the entry-level price for customers is now zero.

Media companies need to pay attention, and maybe discover some new opportunities.

Two examples from outside the media world:

  • On Thursday, Adobe launched a free version of its powerful and pricey Photoshop, called Photoshop Express. According to the trade press, the Photoshop brand was at risk of becoming irrelevant to young users who have access to lots of free tools.
  • Yesterday I was looking for a system for creating invoices and keeping books for my consulting business. I checked out a few systems, including QuickBooks Pro ($180) but discovered that QuickBooks Simple Start (free) is perfect for my needs right now. Thus ended my search for an accounting program. And when my needs grow, I can already see what I’ll upgrade to.

Closer to home, this week at MaineToday, we were developing pricing models for our upcoming directory program. Guess what: the biggest discussion was how to pump enough advertiser value into the free level. Big change from the days when we tiptoed around the idea that classified advertisers wouldn’t buy newspaper ads if we gave away something free online.

Point is: Craig didn’t invent “free” — classifieds or otherwise. The “free” train has been flying down the tracks of the Internet since ’95.

But for years, anyone with a digital-disruptable business model studiously avoided hearing the whistle. They instead focused on how to keep current customers paying, not how to attract new customers with a free entry level. Their theory was that giving away something for free devalues the paid product. (That was the paid vs free content debate. Seems so 20th Century now.) Meanwhile new entrepreneurs, with nothing to lose, got creative about exploring free.

For a local media company, the issue of free advertising is critical and isn’t going away. Local businesses are discovering all kinds of new ways to find customers, including strategies that cost them little or nothing out-of-pocket. Most of these businesses are probably not even your current customers. When they’ve become successful with their free strategies and they’re ready to pay for something more sophisticated, where will they spend that money?

The challenge is to create programs that expose local advertisers to your local audience, with a tiered value level that starts at free and moves up from there. When free is the assumed entry level, the competition is for those entry-level customers’ time, not their money. So there needs to be a good ROI for even the free advertiser’s time. The revenue challenge is to make sure there is enough value at the higher tiers so the financial ROI works for paying advertisers. And then overall, there needs to be careful management of technology, cost-of-sales and workflow to ensure the entire program returns a decent profit.

This isn’t simple, of course. But a first simple step is to change the conversation in your media company. Try this as a starter: “There are big new opportunities in free advertising. How can we take advantage of that?”

March 29, 2008 - Posted by | advertising

1 Comment »

  1. […] 19, 2008 by Stan Gauss In the next few years, as we begin to understand the new advertising economy, I believe newspapers will begin to dominate the classified categories again. Of course, I still […]

    Pingback by Classifieds 3.0- The Mashup « Local Visibility | May 18, 2008 | Reply

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