How To Make Money By Selling For Free - A Guide

Last week I got an email from a subscriber, Alex. After some discussions about his startup idea, he asked me -

Is there a way for me to make money even when my customers don't pay for the product?

I'll admit, this thought has crossed my mind almost every day since the conversation and I had to research some alternative revenue models that we can use to monetize our businesses.

And I found quite a few -

Advertisements & Sponsorships

Advertisements and sponsorships are probably the most basic revenue model strategies for free offerings. This strategy involves you to partner with a different brand(s) and offer your customers' or visitors' impressions to them to advertise on.

Facebook, Instagram, Google, and other big websites like TechCrunch make money through advertisements. Even Feedough too.

Moreover, advertisements drive similar free offering models in the offline world as well. You pay a few cents for the daily newspaper just because it is sponsored by advertisers. In fact, a typical newspaper makes around 80 percent of its revenue from advertisers and just 20 percent from readers.

Here's what you can do. If you are sure that you can get good traction with your offering, dedicate a space for advertisers to advertise. This might either reduce your product's final price or you may even be able to provide it for free.

Affiliates

An affiliate revenue model is a commission-based model where you promote a partner's offering and get a commission whenever a person referred by you buys the referred offering.

Influencers, curators, and niche experts follow this model to provide information and consultancy for free.

Websites like Wirecutter, Nerdwallet, etc. have built their entire business model powered by affiliates.

So, yes, you might have guessed correctly. You need to be an expert or portray yourself as an expert if you want to get into affiliate marketing.

I've explained more about the affiliates-based business model in this article.

Freemium

Freemium is a model where the basic services are provided free of charge but charges are levied on additional premium features. Take any hyper-casual game for example. Such games let you play for free but charge money if you want extra lives, add-ons, powers, etc.

Even though the revenue model is common among online SAAS offerings, it can easily be incorporated in the offline world as well.

Imagine a kids' playhouse brand where the entry of the kids and the basic facilities are free but you have to pay if you want your kid with the additional safety of a personal caretaker, or if you want to enter with your kids.

Here's a detailed guide on the freemium business model if you want to learn more about it.

Crowdsourcing

Crowdsourcing is a revenue model with multiple applications. I'll explain three here. '

Wikipedia Model (Crowdfunding)

Wikipedia is a crowdsourced encyclopedia written collaboratively by the people who use it. The platform is run by a not-for-profit organisation, The Wikimedia Foundation, and the platform doesn't charge anything from the users to use the online encyclopedia.

It, however, accepts donations from the businesses, readers, and other users of the internet.

The company has been successfully running on this business model for 20 years now.Here's a detailed article explaining Wikipedia's Business Model.

Duolingo Model (Crowdsourced Work)

Duolingo is a free language learning application where they gamify the courses to keep users interested in learning a new language.

Back in the days when automated translation processes were not much developed and required human intervention to precisely translate the text from one language to another, Duolingo found an opportunity.

The company developed a language learning application which gamified the language learning process. It taught the students new languages and asked them to translate a few sentences as assignments. These sentences were taken from the content-heavy client websites like CNN, Buzzfeed, etc. which paid Duolingo to translate their content into other languages.

Since the content was translated by more than one user, the possibility of error was very low, which proved to be the unique selling proposition for Duolingo in its initial days.

Here's a detailed analysis of Duolingo's business model for you.

Threadless (Crowdsourced Marketplace)

Threadless.com operates on a highly innovative business model. It is a marketplace that let artists sell their art on the company's merchandises.

That is, artists design T-shirts, masks, bags, and stickers etc. and develop and market their own store. Threadless, on the other hand, takes care of the manufacturing, packaging, and delivery.

Now, whenever a customer places an order, both the artist and Threadless make money.

White Labelled API

White labelling has been in practice ever since supermarkets came into existence and started building their own brands. For example, Aldi makes use of local manufacturers to produce goods and then sell it under its own brand.

But today, in the internet era, white labelling has witnessed a different operating model.

Ever wondered how Google Maps makes money when it is provided for free?

Well, even though it doesn't make money by charging the end-user, it does charge the enterprises that use its API. Enterprises like Uber, Lyft, Ola, pay Google for using its Maps API to provide users with a map. (Here's a detailed explanation).

In fact, Google maps makes use of both crowdsourcing and API white labelling business model where it takes data from the end-users, makes its offering better, and sell it to the enterprises.

Here's a great article by Anuj where he explained how the API economy works.

Data Sale

Twitter is free because it sells your data.

OneSignal is another example of a free notification tool that makes money by selling your data to the third parties.

But given the increasing laws and regulations against such business models, I'd suggest you talk to your legal consultant even before you plan to get into one.

But if it works for you, here's a guide I wrote on data monetization.

Licencing And Merch

Angry birds made use of this technique to make money from its free game. The company sold licenced merchandises and even developed a movie inspired by the popular game.

But to capitalise on this model, you need good funding to sustain your business for the long run.

Do you know any other business model like this? Comment and let me know. I'd love to have a discussion on it.