Competing Against Free. A new competitor enters your market and offers a product very similar to yours but with one key difference: It’s free. Do you ignore it, hoping that your customers won’t defect or the free product won’t last? Or do you rapidly introduce a free product of your own in an attempt to quash the threat? These are questions faced by an increasing number of companies—and not just in the digital realm. The “free” business models popularized by companies such as Google, Adobe, and Mozilla are spreading to markets in the physical world, from pharmaceuticals to airlines to automobiles.
How should established companies respond? Clearly, managers are having difficulty figuring this out. For the past five years, we have been studying how incumbents have dealt with competitors employing free business models in a variety of product markets. More commonly, companies that should have taken action didn’t do so quickly enough or at all. Assessing the Threat Choosing Whether and When to Respond. Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully. Koen Pauwels & Allen Weiss Executive Summary Moving from free to “free and fee” for any product or service represents a challenge to managers, especially when consumers have plenty of free alternatives.
This problem arises in many industries, including publishing, entertainment, and online content providers. After the bursting of the Internet bubble, which supported free online content by investor funding and high advertising income, many companies tried charging for their Web content, with varying success. For example, Microsoft entered the online magazine business with Slate, which unsuccessfully tried to charge subscriptions and now exists as a free site. Likewise, in September 2007, The New York Times abandoned the paid version of its editorial pages after two years, illustrating the challenge content providers face online. This article addresses the following research questions on the move from free to fee: (1) What are the long-term performance effects of such a move?
Pauwelsweissfromfreetofeeoct112007. Google Shopping deviendra payant le 17 octobre aux Etats-Unis. Le référencement gratuit des produits que pratiquait Google Product Search laissera la place à un système d'enchères, que Google Shopping prendra en compte pour classer les résultats de requêtes. Le basculement du comparateur de prix de Google sur un modèle payant interviendra le 17 octobre prochain aux Etats-Unis, annonce la firme sur l'un de ses blogs officiels. A cette date, les produits que Google Product Search référençait jusqu'ici gratuitement disparaîtront des listings. La nouvelle formule du comparateur, Google Shopping, n'affichera plus que les annonces payantes, pour lesquelles les marchands doivent dorénavant enchérir.
Concrètement, ils doivent s'engager sur le montant qu'ils paieront si leurs annonces génèrent des clics (CPC) ou des ventes (CPA). Lors d'une requête sur Google Shopping, le moteur choisira l'ordre d'apparition des vendeurs en fonction de deux facteurs : la pertinence vis-à-vis de l'expression recherchée et le montant enchéri par le marchand.