Monday, 6 June 2011

How do Free websites Make Billions?

It is all about numbers!

Simple as that.

If you have 10,000,000 users, then you have a large audience that some other company will want to get there hands on, so that they can influence them and make them buy there products or services.

And once you have the audience, then you can start marketing to them or start charging them.  Ebay started as a free site and then started charging because of the cost of running the site was getting higher.  E Bay now generates about $ 9,000,000,000 a year. 

Once you have the audience then you can either start advertising to them or start charging them.

Good examples of this are Google, Facebook and Ebay.

When Google started out they had no adwords, nor did they own half the world as they do now.  They were a pure search engine, no gimmicks, no other plays,  and it was refreshing. 

Any of us who were around in the late 90’s would remember how atrocious the search engines were.  Dial-up connections that were very slow and their was so many images on every page of the search that it would take forever to load. Along came google,  no ads, one box and a button.  Speed increase in using google was amazing.  They revolutionised search engines.

But initially, they had no income, only expenses.  But they got the numbers.  The numbers were frightening large.  It was like a bear trying to eat a house in one bight,  It exploded. 

So, in this case Google got its user base and then started to look at how to make money.

Should this model be applied to everything?

Absolutely not.  I have read many articles and blogs about web sites which are free and the author ponders how they make money.  It is a very good question!

This model only works with a generic user system.  For example, if you made a website up that is dedicated to providing legal advice on divorce.  The market is a lot smaller than the general market.  So, the potential of getting a huge user base is also quite low.  So, to do this for free, could entail a lot of work and no income.

My Caveat

However, when you think about it though,  any web site, if it generates enough interest and gets a significant user base can be very powerful for that owner, and that is what big companies are after.  User Bases.  The more active users of a site then the greater the demand for them.

What could be made free?

I am surprised that no one has attacked Ebay. 

On Ebay you have to pay when you sell something.  So, why has no one gone out to attack this market.  Somoene like Microsoft, IBM, Google could go out and make one of these quite easily and promote it very easily and do it for free. 

I will leave this one with you, as it now has me intrigued!!

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