This is the overview and introductions lecture in Stanford BUS 21 Monetizing Free: How to Make Money b y Giving Things Away

1. Stanford BUS-21
Martin Westhead
Mastering Marketing
Class Overview
How to make money
by giving things away

2. Administrative Stuff
 Timing:
- Start promptly at 7pm.
- Please let me know in advance if you will be late
- Finish before 9pm
 Tools:
- Class linked-in group
 Grading
- Business plan
- Contributions to class discussions
- Contributions to Linked-in group
 Slides published (for Free!)
- Slideshare.com

3. LinkedIn Group
 “Monetizing Free: How to make money by giving things
away”
 Please read and contribute
- Comment on discussions
- Share ideas and links
- Discuss class material
 Grades (for those being graded) base partly on your
contributions
 http://linkd.in/1ll7LNy

4. Grading - Business Plan
 Business plan for business that uses free can be:
- A new venture
- A new product of an existing venture
- Real or imagined
- Non-free plan to deal with free competitor
 Slide deck:
- Business model
- How and when will you make money
- Competition
- How will you beat existing competition and stay ahead of new competition
- Launch plan
- How will you launch and get traction
- Financials
- Investment cost – how much will you burn before you are cash flow positive
- Possible size of the opportunity
- Analysis of the cost of supporting free offering vs. revenue
 Best 3-4 presentations given to me will present on the last day
- Key criteria: reference material from the class
 Class chooses the best – there will be a prize!

5. Discussions
 Opportunity for class interaction
- 20-30 mins
 Topics decided the week before
- Come armed with thoughts and ideas!
- Suggestions for discussion topics welcome
 Contributions count towards grade
 Be polemic!
- Discussions are no fun if we all agree 

6. Guest Lectures
Brandon Harris – Senior Designer,
Wikimedia Foundation
Peter Fishman - Principal Analytics
Manager, Yammer, Microsoft
Mystery guest
?

7. Introductions - Me
 Martin Westhead
- Engineer and entrepreneur
- Director of Global Payments at Groupon
- PhD from the University of Edinburgh
- Using and developing web technology since 1993
- 5 years at Ning a large-scale (initially) free social network service
- Excited about this course
 Experience in Communities and Monetization
- Run payments for a $6B business
- Teach classes on Communities and Subscription business model
- Executive experience in Free Internet businesses

8. Why do I care about free?
 Followed the Web from the start
- 1994 1st WWW conference at Cern
 Early business models (90’s)
- Build a free service
- Get it as big as you can
- Sell it to someone
- Didn’t make much sense outside
the Valley
 Google, Facebook…
- Free services can make money
 2009 Joined Ning
- a free service without a business
model
- Watched the search for revenue
until - a year later moved to paid
 2011 Ning bought by Glam Media
- I learned about Media business
models
 Open Source
- Changing the software industry
- Kill Bill Open Source billing
 Changing our view of customers,
customer value and even of
corporations
 What makes Free work?
- Ingredients for success
- Avoiding Failures
- How do you make money?
Nothing more disruptive than a free price point

9. Introductions - you
 Introductions
- Name
- Background
- Why you’re here
- What you expect
- One non-class related fact about yourself

10. Poll: Free is obvious
1. It is obvious that Free-based business are the
future
2. There’s no such thing as a Free lunch: its all
smoke and mirrors and clever marketing
3. I think Free-based businesses are interesting
but I’m not convinced they really work

11. Poll:B2B or B2C
1. I am most interested in consumer businesses
2. I am most interested in enterprise businesses
3. I am interested in both

12. Poll: Freemium or
Platforms
1. I am most interested in Freemium
2. I am most interested in Platforms
- Particularly Advertising
3. I have no preference

13. What to expect from this
course
 The use of Free is a huge
topic
- Spans centauries of
marketing
- Being reinvented recently
 This class:
- NOT an economics course or
business theory
- Practical introduction to the
key concepts
- Lots of examples
 Free is NOT a silver bullet
- You still need a great product
 No single answer
- Customize the ideas here for
your use case
- Innovate – Free is still a big
experiment

14. This course is a Safari
Study of Free business
models is new
It is Zoology NOT Physics

15. Class Topics
 Setting the scene
- Expectations
- Definition of Free
- History of Free
- Psychology of Free
- Twenty-first century free is
different
 Core concepts
- “Free” models
- Direct Cross Subsidy
- Platforms (two/multi-sided markets)
- Freemium
- Pay what you want/Donations
- Abundance vs scarcity thinking
- Mindshare markets:
- Reputation and attention
- Demonetization
 Filling out the picture
- Competing with free
- Open Source and Community
- Donations and Pay-what-you want
- Privacy, Abuse and Overindulgence
- Case studies

16. Lecture Plan
 Week 1 (April 1st)
- Introductions
- Overview
- History and Business Models
 Week 2 (April 8th)
- Model: Direct cross subsidy
- Psychology of Free
- Guest lecture – Peter Fishman
 Week 3 (April 15th)
- Model: Two sided markets
- Advertizing
- Abundance and Scarcity
- Class Discussion
 Week 4 (April 22nd)
- Model: Pay what you want/donation
- Mindshare markets
- Communities
- Guest lecture – Brandon Harris
 Week 5 (April 29TH)
- Model: Freemium
- Open Source
- Class Discussion
 Week 6 (May 6th)
- Competition in Free Markets
- Guest lecture – TBD
 Week (May 13th)
- Successful Free
- Google
- Games Industry
- Unsuccessful Free
- Ning
- Privacy, Abuse, Ethics
- Class Discussion
 Week (May 20th)
- Conclusions
- Student presentations

17. References
 “Free” by Chris Anderson
- Free PDF / Amazon / Free Audio Book
 “The Mind Share Market” by Nicholas Pujol
- Amazon
 “Predictably Irrational” by Dan Ariely
- Amazon
 Papers
- “Two-Sided Markets: A Progress Report” Jean-Charles Rochet, Jean
Tirole, November 29, 2005
- “Multi-Sided Platforms” Andrei Hagiu, Julian Wright
- “The Art of Standards Wars”, Carl Shapiro, Hal R. Varian
- “Competition in Two-Sided Markets” Mark Armstrong Department of
Economics University College London August 2002: revised May 2005
- “Zero as a Special Price: The True Value of Free Products” Kristina
Shampanier, Nina Mazar, Joseph L. Rotman, Dan Ariely

18. Free Monty Python
November 2008