공짜 경제에서 어떻게 돈을 버는가?(How to Make Money in Free Economy)

공짜�� 경제에서�� 어떻게�� 돈을�� 버는가?(How to Make Money in Free Economy)

2015. 4. 6.

Prof. Sangkyu RhoGraduate School of Business

Seoul National University

http://www.slideshare.net/srho/how-to-make-money-in-free-economy

(CC BY-SA 3.0) Sangkyu Rho, SNU Business School

Who’s Sangkyu Rho?

• Profession: – 서울대�� 경영대�� 교수�� since 1995– 서울대�� 경영대�� MBA부학장�� from 2013 to 2014– Blogger since 2013

• Interests: – Data & Knowledge– Social & Network

• Contacts: – [email protected]– www.organicmedialab.com – Facebook: sangkyu.rho– LinkedIn: Sangkyu Rho– Twitter: @srho77


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?

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(CC BY-SA 3.0) Sangkyu Rho, SNU Business School 4


“Information wants to be FREE”

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EconomicZero marginal cost (MC=0) All Information

No value at all in some cases SNS with 0 users

SocialFree sharing Wikipedia

Free copying Piracy

Psychological Free as anchor prices Free app vs. $1 app

Strategic Free as weapons Kakao Talk


How is Free Possible?

Cross Subsidization (교차보조)

• Someone is paying for me.

• “There ain’t no such thing as a free lunch!”

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Cross Subsidization

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To From Example

Free Product Paid Product 미끼 상품 (Loss Leader)

Free Now Pay Later공짜폰, 무료 체험(Free trial),

부분유료화(Microtransaction) 게임

Free Users Paying Users Freemium(Evernote), Pay What You 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/


Free as a Strategy

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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


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

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3 Components of Media

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http://organicmedialab.com/2013/03/21/3-components-of-media/


정보재의 특징

Marginal Cost (MC) of Information is 0

Information is Soft

Information is Experience Good

Piracy of Information is Inevitable

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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

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Free or Not for Free?

Free as a Strategy

Value-based Pricing

Versioning and Bundling

Help from Potential Customers

Maximizing User Experience

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Marginal Cost of Information is 0

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Quantity

Tota

l Cos

t/Rev

enue

Cost of Information Goods

Cost of Physical Goods

Revenue

Q*



Implication of MC = 0

Free version

Unlimited supply

Economies of scale

NOT Cost-based approach, BUT Value-based approach

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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

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Economics of Versions and Bundles

Goal: Value Maximization

Price discrimination [Pigou, 1920]

• Personalized pricing (Perfect)

• Group pricing (Direct)

• Versioning (Indirect)

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Quantity Demanded

Price

10,000

20,000

10,000 20,000



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?

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Quantity Demanded

Price

10,000

20,000

10,000 20,000


Group Pricing

A different price for each group (e.g, Student versions)

Why?

• Price sensitivity

• Network effects

• Lock-in

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Personalized Pricing

A different price for everyone

• Know your customers

• Personalize your product

• Differentiate your prices when possible

e.g., Google Adwords

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Quantity Demanded

Price

10,000

20,000

10,000 20,000



BundlingA 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

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Word ExcelCheolsoo 150,000 100,000Younghee 100,000 150,000


Revenue ModelsPackaging

• What to pay for

Payer

• Who’s paying?

Pricing

• How (much) to pay

• When to pay

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Revenue Models of Music

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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


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)

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Packaging (Bundling)Bundling

• Office Suite (Microsoft, Google Apps)

• All You Can Eat (Netflix, Spotify)

• Mixed Bundle (Amazon Prime)

Extension

• Add service (Apple iPod + iTunes)

• Add product (Amazon Prime + Kindle Fire)

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PricingSubscriptions

• Video rental subscription (Netflix)

Rentals

• Kindle Owner’s Lending Library (Amazon)

Dynamic Pricing

• Auction (Google AdWords)

• Pay What You Want (Donationware)

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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

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3rd Party Payer (Advertising)

Performance:

• Impression — Click — Sale

Participation (Mediation):

• Passive — Interactive — Active — Money Making(?)

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3rd Party Payer (Sponsorship)

Product placement

Contents sponsorship

Crowd Funding

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“Information wants to be FREE”

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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.

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Any Questions?

[email protected]

Facebook: sangkyu.rhoLinkedIn: Sangkyu Rho

Twitter: @srho77