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October 03, 2008

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DCS

Chris, I think I'd have to take issue with several of your examples:

#54 Pierre Omidyar $6.3 billion, eBay - The core of eBay's business is auctions and more recently "Buy Now," neither of which have *ever* been offered free; the company charges both a listing fee AND a % of the ultimate sale price plus a whole bunch of incremental fees for images, preferential placement, reserve price, etc.

#246 Joseph Mansueto, $1.9 billion, Morningstar (freemium investing services) -- Morningstar was a hugely successful company -- appearing on the Inc. 500 list several times -- long before the Web became mainstream and they *never* gave anything of value away for free back then (except the promotional "trial" subscriptions)

#377 Peter Thiel, $1.3 billion, Facebook, Paypal -- Has/Does Paypal offer free person-to-person transfers? I've only used them for a handful of personal eBay sales and for my business and in both cases they take ~3% of the transaction value, roughly the same as a merchant CC account.

Have I missed something here?

Chris Anderson

DCS, fair points. I'd included eBay because they don't charge consumers (buyers) but it's a marginal case, I agree. You're also right that Mansueto made his fortune before the company adopted the freemium model. Thiel is on the list for Facebook, not Paypal, but to be honest I don't know how much of his fortune is due to Facebook.

So those three are on the iffy side, I agree. But don't worry--this is just an off-the-cuff blog post, not material for the book.

peterme

While I get your point, I too take some issue.

While Mark Cuban might have made his big money on Broadcast.com, which was free, he's since parlayed that into a number of enterprises that charge handsomely, including the Dallas Mavericks and 2929 Entertainment.
http://en.wikipedia.org/wiki/Mark_Cuban#Billionaire_entrepreneur
(And it goes similarly for Todd Wagner)

The thing that most intrigued me, reading this, was how Mark Cuban is worth more than either Jerry or David, and how ironic that is.
Oprah Winfrey has enterprises other than TV, though that undoubtedly generates the bulk of her worth.

Kevin Kelly

Peter Thiel made his fortune from PayPal, which is not free. Actually PayPal started out free. There were no transactional costs for the first year or two. Maybe longer. Very few of us were using it then, but I do recall wondering how they were making money. Point is while this is not a new TYPE of free, it is a common Free strategy: start off free and then later charge for the identical service.

Fergal

I wonder does Larry have a gripe with Sergey that he has earned .1 of a billion more!! Could be trouble in the camp soon!!

Zorro

Paypal and Ebay might /appear/ free to buyers as they simply do not see the fees. On both sellers pay the fees and /obviously/ pass them onto the consumer...

Ebay are now about as far from free as it is possible to be. They are now significantly more expensive than putting something in the local classified ads. (And for this very reason their future is now quite shaky!)

Jakob Nielsen

Early PayPal didn't just charge no visible fees, but it actually *paid* users to sign up. I got $5 from them :-)

Of course, that still doesn't mean that it's a free service, any more than a bank is a free service, even if they don't charge you for an account if you maintain a certain balance. The money is extracted from the difference in interest percentages between what they pay you (probably 0% for early PayPal balances) and what they can earn in the market.

@ZaggedEdge

Revenue models anyone?

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

FREE was available in all digital forms--ebook, web book, and audiobook--for free shortly after the hardcover was published on July 7th. The ebook and web book were free for a limited time and limited to certain geographic regions as determined by each national publisher; the unabridged MP3 audiobook (get zip file here) will remain free forever, available in all regions.

Order the hardcover now!