Stanford BUS-21Martin Westhead

Mastering Marketing

Class Overview

How to make money by giving things away

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

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

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!

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

Guest Lectures

Brandon Harris – Senior Designer, Wikimedia Foundation

Peter Fishman - Principal Analytics Manager, Yammer, Microsoft

Mystery guest ?

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

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

Introductions - you Introductions

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

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

Poll:B2B or B2C

1. I am most interested in consumer businesses2. I am most interested in enterprise businesses3. I am interested in both

Poll: Freemium or Platforms

1. I am most interested in Freemium2. I am most interested in Platforms

- Particularly Advertising3. I have no preference

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

This course is a Safari

Study of Free business models is new

It is Zoology NOT Physics

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

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

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

Free Monty PythonNovember 2008