Free World Opportunities: Tom Smith
Contemplates the Advertising Opportunities in a Free-Content World

Today’s rapid advances in technology have dramatically lowered the cost of producing web content and services. The core factors of the “Free World”: processing power, storage and broadband are only going to get cheaper and become more available to larger numbers of people. Geographical location and proximity have little relevance in a digital world, which means the scale of audience needed to provide free access is much easier to find for both mass and niche products. These factors have fundamentally changed the basic economic rules of production and supply, so that free is now a viable business model for any category impacted by the web.
According to Smith, “We now live in a culture where we are exposed to an unprecedented volume of free content and services, and we are often overwhelmed by it. Young people under the age of 18 have no experience in their lives of paying for access and information.”

The free examples are numerous:
» Skype allows for phone calls anywhere in the world via broadband.
» Wikipedia enables free access to the world’s largest encyclopedia.
» YouTube provides the best TV clips at the click of the mouse.
» Flickr offers the ability to upload and share of photos— without charge.
» Spiralfrog is one of a number of U.S. download sites that offers free music in exchange for an ad-supported environment.
» Facebook is ad-funded to allow for global social-networking access.
» Metro provides free newspapers in over 100 cities by capitalizing on advertising to a younger, urban demographic.
» Free phone service can be viable as Blyk mobile has demonstrated in Europe. The service is completely free to 16-24 year olds, provided they receive and watch a certain number of video and text ads on their handsets.

This increased demand for free access is progressively moving offline and more industries will adapt and evolve their business and pricing models. Here are some potential examples:

» Hotel rooms are available free-of-charge today as they are funded through sampling, gambling on the in-room TV, product placement and retailing the interiors.
» Air travel is moving toward a free model as successful budget airlines are demonstrating that costs can be covered by in-air shopping, gambling, and food sales.
» Clothing items like t-shirts are often free when they are worn for promotion. Revenues are made by selling the premium versions.
» Hollywood Blockbuster offers free movie downloads, which are funded through merchandising, product placements and the sales of limited edition box sets.
If today’s consumers have a mantra, Smith would characterize it as, “We’re Not Paying Anymore.” He outlines the key factors contributing to the expectation of free access. They include:

Unlimited choice
Faced with an infinite number of options, today’s consumer is unlikely to choose the one that charges for access. Smith asks, “Do you think YouTube would be the success it is if you had to pay to use it?” Given the open and democratic nature of the web, there is simply too much competition to justify the charges.

Constant Distraction
We now live in a world of constant distraction populated with hundreds of millions of websites, countless friend profiles, RSS feeds by the minute, three-way instant messenger conversations and never-ending email. And it’s not just online; traditional media still holds a prominent place in our day and now technology like games consoles and iPods are also competing for attention. Smith believes that such choice “directly erodes the time and focus we can give to a particular piece of content or service, and indirectly erodes the value and price we are willing to pay for it.”

Browsing Culture
Faced with constant distraction, consumers gravitate to content that is increasingly byte-sized, hence the growing popularity of video clips and blogging. The shorter the content gets, the less likely we want to pay for it.

We are Content Generators
The rise of blogs, social media and photo-sharing and video-sharing sites means that we all have the ability to create and share content. The result is hundreds of millions of amateur publishers, producers and composers and a massive ecosystem of free content, for which users have no intention of ever paying, according to Smith. The wealth of content populates free-to-access web services and now provides viable alternatives to paid-access and professional media.

Platformization
With such a wealth of content to organize and sort, there is a need for services that provide tools to sift and manage it. Social networks, personalized home pages, photo-sharing sites and video-watching sites are now the platforms that help organize, sort and prioritize the complex world of the content free economy.

Pirating
Smith emphasizes how the digitalization of entertainment and the drivers of “Free World” have meant that it’s increasingly easy to reproduce content for nothing and on any scale you like. “Back in the analogue era,” says Smith, “you had to manually copy a program VHS tape by VHS tape. Now you can produce and distribute hundreds of copies at the click of a button. As broadband has expanded, file-sharing sites like Bit Torent, Limewire and Emule, which allow you to search for and download content on other users machines, have become commonplace, and music, films and TV have been downloaded illegally in their billions.
“The impact of this has been to remove the association of payment with entertainment content, particularly among younger age groups. It has also commoditized music and film due to the wealth of material we can now download and store easily. We are less willing to pay for this. Even if we are not actively downloading illegal content, the culture of non-payment now permeates.”
Research from the Universal McCann Waves project demonstrates that today’s consumer has no interest in paying for online content and services. Advertising support is overwhelmingly preferred. The graph below underscores how consumers are willing to embrace advertising in order to receive free access.

Today’s New Online Business Model:
Free access is simple, according to Smith as it is about finding the many and charging the few. He outlines the many ways in which companies are now monetizing their sites based on this basic premise:
Ad Support: Most new websites and services pursue advertising revenue, which is now resulting in a plethora of innovative solutions and new platforms to support advertising.
Additional services: Websites are increasingly trying to sell additional services. Converting just 2% of a user base can mean a significant revenue stream. For example, photo sharing site Flickr is free to use, but increasing the number of photo uploads requires an annual fee. While Basecamp, an online project management tool, allows free access, but charges for a premium account.
Retail: Some sites have taken to selling other people’s product of their own branded product to drive revenue.
Affiliate schemes: Many sites recommend products and services. They are likely to belong to affiliate schemes that provide a percent of sales attributed to links or ads.
Syndication: Good content can be sold to other sites or media companies. Services like music retail sites which can be re-branded as white label or private label products.
Micro-payments: Millions of tiny transactions do add up. Micro-payments are often used by free virtual games, massive multiplayer games and social networks where users pay by S MS, credit cards, or systems like PayPal.

A Huge Opportunity for Marketers
Tom Smith sees this environment as providing a huge opportunity for marketers, particularly in terms of advertising, sponsorship and partnerships. Today, online means a reliance on ad support, and the formats are becoming more creative. Young people are extremely open to ads. They see advertising as playing a positive role in their value equation as they gladly accept ads so that their services are free. This means that advertising has a huge role to play in underpinning the future economy.

Here are some of his suggestions for embracing a future that is increasingly ad-supported:
Get Involved. There are a mass of new opportunities for advertisers and brands from the wealth of new and inventive media owners.
Go to the Consumer. The wealth of content now available means that webs users increasingly gravitate towards platforms or applications that organize their webs experience such as video sharing sites, personalized homepages and photo sharing sites. Content and advertising need to be taken to these platforms rather than hidden away on a siloed website. Web users should be encouraged to share branded content.
Increase Your Online Budget. The more free content and services are available online, the more time we spend there, and the less time we spend with other media and social options.
Stand Out in a World of Distraction. Forget fragmentation, we live in a world of distraction, and this requires an advertiser to focus on the strength of content, as well creative ideas, multimedia executions, and user input. The wealth of free, on-demand content competing for attention or engagement means that standing out becomes increasingly difficult.
Do, Don’t Show. The future of marketing is about doing, not showing, and branded content is increasingly important — online and in real life. And economy driven by free access is the perfect environment for branded content, services or events. Given that “free” is the driving factor, whether a service has been made free by branded support for investment is now irrelevant. The only caveat is that experience must be positive, useful, entertaining and genuinely beneficial. Otherwise, it will not stand out in the crowd of content.

Tom Smith, Universal McCann’s head of new media thinking for EMEA, has been considering the value of free content in today’s advertising business model. And he’s excited by the possibilities. Smith explored these ideas in a Universal McCann TrendMarker communiqué and recently talked to The Internationalist to further outline how marketers can benefit from “Advertising in the Free World.” His thinking about new business models based on free access is influenced by author Chris Anderson and his book about “Free World” economics, titled The Long Tail. Smith believes that the consumers’ desire for free access and free services is only going to increase over time.