Are Free Services Becoming the Norm?

I haven’t blogged this weekend because I have been knee deep doing a project on something called Payment for Order Flow (if you didn’t get to, read my blog post on it, it will blow your mind). In the midst of my research, it began to dawn on me – how many more services will become free? Here is my logic: the consumer paradigm has fundamentally changed with the creation of the internet – the internet was supposed to make access free. Website’s were free to chat on, games were free to play, and services such as document storage, photo editing, and many other platforms became free. The question that now arises – can this business model reach into traditional businesses, or is it confined to the internet?

It is easy to understand how an internet service can be free – the costs are very low. There are no brick and mortar stores, less personnel, less overhead, etc. etc. – it simply costs much less to operate. However, there has also been a key innovation – web companies have been the leader in indirectly monetizing their user base. Think about it – Facebook doesn’t charge you to use their service because they make money off you! The more ‘you’s they can get, the more enticing their value proposition becomes (data), and the more they can charge for it. Many other service providers have adopted a freemium model – you get basic access for free, but the bells and whistles cost money (such as LinkedIn). The question is – how far can this go?

This thought came up as I found myself at the gym the other day. Per usual, I was benching quite a bit (nothing less than 300lb’s of course), and I found myself spending a lot of down time in-between sets. That’s when my mind started wandering – as a user of the gym, very little of my time is spent engaged in something. Whether it’s sitting down between sets, running and watching whatever they have on the TV’s, or stretching, I am very poorly utilized in that time. Then I thought what if a gym could become just like a website – a place to engage users and draw data?

Bear with me, and let’s dive into this example. What if I could offer a free gym – state of the art equipment, facilities, etc – but make it look more like a website then a traditional gym. First thing I would do is sell ad space; everywhere. That’s pretty obvious though – and it wouldn’t be able to cover rent (especially not in Manhattan), but what if I took it one step further. Every visitor picks up an iPad on their way in. During their workout (whether they are running, lifting weights, or stretching), they need to fill out a certain number of surveys or questions. Gatorade, Nike, or any other athletic product could run surveys and market research projects right in the gym – and get user feedback while they are actually working out! Then you make every visitor enter their personal data – how old they are, what brand of sneakers they wear, whether or not they take a protein shake after working out, and what brand – then you consolidate this data. You can then sell it to anyone who may be interested. Nike wants to know how many women aged 30-45 who work out three times a week or more wear their shoes? Not many gyms can tell you that!

So you have the revenue sources (just some that came off the top of my mind, if you spent some more time I am sure you could figure out more), now you institute the freemium model. Let’s say you’re tired of filling out surveys in-between sets, and you want to relax at the gym – that’s fine. All you have to do is pay a certain monthly fee and you no longer have to! You can also cut out ad’s from certain sections of the gym (the ‘ad free’ zone), and anything else users might want.

What you have done in the above example is take a service that has traditionally be a play-for-play service, and made it free. By using techniques that have largely been pioneered by technology companies, you have turned a traditional model on its head. What I wonder now, and what I will spend the next few weeks wondering, is what other businesses can you apply a similar model too? What sectors are ripe for a total model shift? Who will be victim to the next disruptive shift? These are the idea’s that will change the status quo of the user experience as we know it.

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