Wednesday, March 30, 2016

Free Technology Services and Creative Ways to Earn Revenue

The article by Mickinsey & Company “Ten IT-Enabled Business Trends for the Decade Ahead” highlights IT trends that they foresee will be prevalent in businesses  and the world within the next 10 years. One particular trend that stood out to me was the “ ‘Freeing’ your business model through Internet-inspired personalization and simplification” trend.

On a recent episode of Shark Tank, a popular show on ABC where entrepreneurs pitch their company and product to established businessmen, I saw entrepreneurs present a new exercise app called Sworkit.[1] The app was free, easy to use, and the workouts were completely customizable to the user.

As I continued to watch the show their business strategy became evident. The company was using a freemium pricing method by offering the app for free but also giving the customers an option to purchase more workouts. However, since the workout library is pretty extensive, there are people who would probably never have to or want to purchase additional workouts. For the free-riding customers who never purchase additional workouts they are shown ads.

I was really intrigued by this app because I was looking for an exercise app but I did not want to purchase one and the ones that were free were poor quality, hard to use, and not customizable. This relates back to McKinsey article that customers now expect everything to be free. If the app is not free then the customer will just download another app that is. In addition, if the app has a learning curve to it, it might just be more time efficient to download another app that is easier to use. 

Also in relation to the McKinsey article, businesses need to find ways to utilize their high quality technology to produce revenue without charging the end-user. The Sworkit app had a multi-sided revenue model by charging the end-user only if he wanted to purchase more workouts and otherwise not charging the user and showing them ads instead. These ads are sold to advertisers who purchase the ad space.

Sworkit does allow you to register with a Google or Facebook account and collects basic information about the user from those accounts. I am assuming that Sworkit is collecting some user data that would allow it display ads that are relevant to its customers.

In general, I agree completely with the prediction that IT-enabled businesses will now offer free services and find creative ways to earn revenue without charging its end-users.


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