Everyone loves getting free stuff, but is it also a viable business model?
Nicolas Pujol, an entrepreneur who helped MySQL become the world’s second largest open source company, looked at the ways entrepreneurs can monetise free products and use other productive marketing techniques in his new book, “The Mind Share Market: The Power of an Alternative Currency.”
We spoke with Pujol about why he decided to leave MySQL and why “free” is the future of business.
Business Insider: What inspired you to write your book?
Nicolas Pujol: I came across these studies from MIT on the views of price and our irrational attraction to a zero price. These studies helped me make the decision to write my book. I realised that no one was really looking at the meaning of “free” from a business standpoint and so I started researching it. I met with economists and I was stunned at how much [information] is out there that most people don’t know about.
What are your thoughts on the ways most business owners offer free products and services?
There are 3 types of “free vs. paid” business models. The concept of “buy one, get one free” is the least interesting to consumers since you’re not actually getting something for free if you have to pay to get it.
Freemium and the two-sided platform [offering a product or service and funding it through ads] make sense because customers can receive value with no obligation to spend money. This is what I call “productive advertising” because the product is the ad and it produces value.
Your book is titled The Mind Share Market. What does “mind share” mean?
Mind share is what people exchange for value. When you pick up a free product, mind share is what you think of the brand; your consideration for the brand, which plants the seed for subsequent transactions.
How important is it for businesses to offer something for free?
The word free is so powerful the FTC had to issue a guide to regulate the way businesses use it. Every company should try to have a free base to gain lots of users and then support it with an upgraded product.
Should the content on the Internet be free?
I try to see things from a consumer’s perspective. I think everyone should have access to the Internet but at the same time every company has a right to monetise its services.
So you’re a proponent of free market capitalism?
Yes. I’m glad you said capitalism since free is often mistaken as socialism. It’s not. It’s actually hyper-capitalism since companies have to be extremely competitive. To come out on top, companies should always do the difficult thing, otherwise someone else will figure out a way to make it cheaper. If you can do something hard, you will always be able to differentiate yourself.
What else can companies do to be competitive?
Customer service is very important. When so many people are offering the same services or products, how you treat your customers is a way to differentiate yourself.
You mentioned in your book that competitiveness comes from sharing. What are the disadvantages companies face if they do not share their intellectual property?
There are two ways to share. The first is a zero price (regardless of whether a product is open source or not). A zero price creates new demand, which equals new customers. The disadvantage for a company not tackling this segment is to leave it to other market players. The second way is when the intellectual property itself can be shared, such as open source licenses.
A well known example is that of Wikipedia (anyone can edit) vs. Britannica (publisher controls the content). There will be other “Wikipedias” in the future in other fields, when a platform finds a community to feed it. No commercial entity can compete with millions or perhaps one day, billions of volunteers. So you can see that there is fragility in a model that is closed to community participation.
Do we still need patents and copyright laws or would we be better off without them?
They can co-exist with a shared model, “mind share market”, since any business with a free product or service needs both markets to succeed. For example, MySQL was dual licensed, which means that the company retained commercial rights and could sell commercial licenses when customers needed them, while enabling millions of users to build the internet without ever paying us monetarily.
Any regrets about leaving MySQL?
No. I think it’s good to leave when things are going well, and at the same time I wanted to do something new. MySQL has a bright future inside of Oracle, the acquisition made a lot of sense from that standpoint. Right now I’m enjoying writing and I’m working on another book. I enjoy writing about problems that haven’t been fixed yet.
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