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The Next Greatest Startup Model: Freebies

Tuesday September 27, 2016,

4 min Read

From high school students to venture capitalists, almost everyone is looking for the next greatest ideas that will give rise to the next Mark Zuckerbergs. I have also thought of this everywhere from seminars to the washroom but, the most disruptive startups which will greatly affect the world will be products and services that are free and accessible to users without any financial obligations. Instant messaging app, Whatsapp does not serve any ads on their platform but they were acquired by Facebook Inc. for $19billion whiles tech companies which charged premiums even while displaying text and banner ads were acquired for less than $100million.Over the years, a number of multinational corporations have made startup acquisitions not for the revenues of the startup but its user base. Going behind a pay wall is profitable for the short-term but when a competitor springs up with freebies, even the most loyal customers may have a rethink. If a product is making an impact, then the income will automatically follow. Freemiums tremendously lower your cost of customer acquisitions

Unicorn startups like Snapchat are yet to make any revenue but they have raised billions in funding. One sure way for a startup to fail is via price hikes. Price hikes lead to customers or payers’ revolt. Provide services to users without manipulating them or charging a cent and clients will pay you in order to reach out to your market. Advertisers and multi-national corporations are constantly looking for a great pool to cast their nets. Internet businesses like Google and Yahoo came into the spotlight because of their free email and search engine services. If Google and Yahoo charged a fee per email sent, post offices will still be in business.

The best businesses today are the ones striving daily to make their products less expensive. The tech bubble of the year 2000 did not happen solely because of the lack of revenues but because most of the tech companies’ market valuations did not reflect the number of users they had. However, the internet has become global since then. If you have a startup or business idea which is as addictive as a Facebook, provide free and easy access to your target market. Sophisticated business models or products are only used by the founders and whoever has all-day to hear an explanation of how the product works. Jordan “Captain Sparklez” Maron became famous for making videos of him playing Minecraft. Youtube pays him for his services. Apparently, he has amassed over 2.6billion in total views on the video streaming platform. The Youtube star bought a $4.5million mansion in Hollywood in 2015.

Price can be a huge determinant of customer loyalty. The internet connects entrepreneurs to a global audience but not every can boast of capital adequacy or surplus income especially in developing countries, so if you want to attain over 1billion users like Facebook, you will have to consider everyone globally and not just the financially independent. Coca Cola has being in existence for over a hundred and twenty years but they continue to be a global leader in the beverage industry because of how affordable their products are. Most top venture capitalists and angel investors lookout for startups which are addictive. That is a business with the tendency to generate more active users. To get people to be addicted to your product, it has to be very affordable if not free. Give away the software and we will gladly pay to update to a newer version. Give away the cell phone and we will come back to buy the monthly plans. Free trial periods are an innovative way to create awareness and get people to be hooked to your product. Uber gives out free rides anytime the ride hailing startup launches in a new city. The internet is a free world so if you are going to build on it, money should not be your number one building block. One major reason why the internet has being able to take over so many industries including newspapers is because of its free and easy access.

The technology industry is a very competitive one, to gain a competitive advantage as a startup, cannot be attained with just bright ideas. The most clicked websites including Facebook and Google do not bombard their users with pay walls. Freebies are attractive and they really sell. It is also a very innovative way to create awareness such that people who may not plan on trying out your product or other relate services suddenly change their minds.

In other words, the profits are tied to the people.