Start Up Blog

Delayed Revenue Model vs Free (DRM)

Posted in entrepreneurship by Steve Sammartino on July 30, 2009

I know I am being a bit of a dog with a bone here. But we really need to put this ‘Free’ stupidity to rest once and for all. Sure it’s semantics, but this is what the Free model really is:

Delayed Revenue Model

If we have a so called ‘Free’ model, we are simply providing resources (at out cost) in order to extract revenue through alternative means later, or via a trade sale to incumbents who see value in what we have created. In both cases the ultimate goal is Revenue.

delayed

In many ways it’s riskier to go down the free track, simple because time and money are inextricably linked. If we don’t end up ‘Monetizing’ (another word I hate) then we are simply in the wealth transfer business.

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6 Responses

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  1. ThorSalesWarlord said, on July 30, 2009 at 1:07 pm

    I personally sell “loss leader” events and other opt in’s we use on the net and via teleconference are exactly as you say – back end revenue generators.
    I have become embroiled in argument with MD’s I have worked contracting sales to about my utter transparency on this point.
    In B2B I think if you are of the view your prospects are accepting “for free” stuff without the expectation of a back end sale you are fooling yourself.
    Being frank about this with your prospects actually takes the “sting” out of the “scary sale” and can in fact HELP you because the people who opt in / show up are EXPECTING a sale and therefore on some level complicit / consenting to consider your offering.
    If that’s what your object is, I say – be straight up about it.
    I don’t however, understand your issue with “monetizing”?
    When I look at the amount of massive value you offer through your blogs – if you process modelled some of that information and created products which took that model &”monetized” your current “free” blog offerings – you would be too busy surfing to post anymore – not that I would encourage that of course… Your posts amuse me.

    : )

  2. Steve Sammartino said, on July 30, 2009 at 2:19 pm

    The reasons the word Monetizing is ridiculous is that – it assumes making moeny is some kind of after thought, and that it isn’t the reason business exists in the first point. I prefer words like ‘Revenue Stream’ ‘Profit’ ‘Sales’ – normal real business parlance for people who aren’t too scared to charge a price in the first place.

    By the way – this blog is practicing the ‘delayed revenue model’

    Steve.

    • ThorSalesWarlord said, on July 30, 2009 at 3:11 pm

      Absolutely with you – What I like about your blog is having a conversation and interacting with you on a topic that interests me and a lot of other like minded folk – Of course you are looking at “delayed revenue” on a blog with 30,000 subscribers – I would reasonably expect you win a fair amount of business from this pre eminence building communication. I DO think you could leverage some of this information more profitably, and help clients in more structured outcomes, as per our discussion the other day. That would reduce some of the delays in the revenue model, and increase profitability massively, but 100 or so hours of work on our end don’t come for free! Our contractors love their children too…
      As to Monetising, you are spot on – the word Monetising assumes correctly “making money is some kind of after thought” with a LOT of sme’s this is SO TRUE. Some, nah bugger it MOST people are scared to ask for the order – and it stems from having NO IDEA what their value is, or what / how to charge. They haven’t thought it through or developed a value equation, and they struggle with sales because they charge what everyone else in their industry charges more or less – not what their product or service is actually worth in its outcome to the client. My business specializes in helping small business with the problem of taking their IP and monetizing it – because they aren’t. And to those clients, its a REAL issue. So the word appeals to them because the idea that what specialist knowledge exists in their business is actually WORTH something to someone is BRAND NEW to them. And very sexy too! Not that this is an issue for you as lecturer at Melbourne Uni perhaps, as the value in your knowledge probably had a fair attached HECS debt to remind you how smart you really are! We discuss this at our events – The average housing industry laborer (not Qualified tradie!) earns around 50k per annum the average medical specialist 150k in their first year. Difference – the amount of investment in their education required to go out and do their job, $0 vs $100k hecs debt – but more over the VALUE they add to their client. You get out what you put in – and you can charge whatever you want if the value proposition to your client is high enough. Most sme’s don’t understand they what is valuable in their business is often their expertise, and they give it away. That is what I am against, so call it monetising or call it a new revenue stream, a profit center, call it whatever you like, but stop giving away your time and your IP, folks, you would be better off giving away your cash. Because you can always make more cash. Time you don’t get back. And ideas are like combustion, if you can harness that energy you can go ANYWHERE with them. Monetisation or perhaps let us say Productisation is a cheap effective fast ROI method of doing that. Oh, ONLY IF your IP is of real value to someone and IF you can sell.

  3. Alex said, on August 1, 2009 at 11:38 am

    Hi Steve,

    I really like what you are saying in this post, and I totally agree. Building “demand” for a product, service, website, etc is the real challenge in the online space. By offering the item first at no cost you are allowing people the opportunity to want what you’re selling. There’s a chance those people wouldn’t even give what your product a chance if there was a cost associated with it.

    -Alex

  4. Pieter said, on August 1, 2009 at 4:24 pm

    From what I understood of Anderson’s book, it was about recognising when the solution/resource you’re providing is becoming “abundant” due to advances in technology (MP3s, blogs etc). In the event that its your sole value proposition, you’re terminally doomed unless you adapt. Adapting in this sense was using this “abundant” resource as the leverage for the sale of your residual or new found scarce resources.
    I suppose its a delayed revenue model, but is it more about recognising new opportunity and cutting loose of assets with a diminishing competitive advantage?

  5. Brett said, on August 5, 2009 at 4:04 am

    I think the point is to just realize that things you once sold can be looked at as a marketing cost that leads to another form of revenue. Give away the book so you get more speaking engagements. Or, speak for free so you can sell more books. You get the idea.

    But you’re right – there is no “Free” model; only a “Free for a while” model. Twitter is having some troubles figuring out how long “a while” is supposed to be.

    For the record, I am enjoying listening to Chris Anderson’s new book, “Free.” (which I downloaded on iTunes for free, of course).


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