The Cost of “Free” : Smashing Mag’s Freemium Model
We are asking the design and blogging community to please “step away from your flamethrower” for a moment to take a hard look at the costs of offering free content.
This post is inspired by the Smashing Magazine predicament and their request for help from other members of the community. We proudly support anyone that is doing good things on the web, so we would like to share a little bit of information that may inspire some empathy for their situation. The Smashing team is full of passionate members of the community who love sharing information on the web. They turned that into a full-time job for a small group in order to keep pushing the limits of top-quality free content.
It’s important to know what goes into providing content on the web, what is and isn’t free and how revenue is generated.
Wordpress is Free
It is true that anyone can register for a free Wordpress account, put together some posts and “start a blog”. There are thousands of examples out there of ones that have tried. However, there is one key ingredient that determines the success of a blog: Time.
Time isn’t Free
Everything takes time: blog design, creating posts, engaging the community, etc. The quality of posts and the frequency of them determine how much time is needed to devote to providing content. The bigger the community gets, the more time is needed to engage the community. How much time is needed to provide content and engage the community determines how many people you need to perform the tasks.
Hosting and Bandwidth aren’t Free
For highly successful blogs with large amounts of traffic, a freely hosted Wordpress blog is not an option. Successful sites like Smashing Magazine have enormous data transfers. (Smashing is hosted on 8 servers) While bandwidth isn’t as expensive as time, Bandwidth = Money.
Time = Money, Bandwidth = Money, Free = No Money
The problem begins when you offer your content for free because Free = No Money and, as you probably know, Time = Money.
Freemium
So, to fix this problem, in comes the Freemium model. Per wikipedia.org, “Freemium is a business model that works by offering basic Web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features.”
Many of you that are familiar with Smashing Magazine may have your eyebrows raised right now, with something like “Smashing is ad supported” running through your mind. While they do get revenue from advertising, they have been making a push towards the freemium model with the Smashing Book and now, a “downloadable digital product with special features”.
Where the Money Goes
This money is used to pay the people involved in dedicating time to providing the quality content that we all know on love on Smashing Magazine. Smashing has a small team that runs the site and pays authors of posts.
The Team
Vitaly Friedman, Sven Lennartz, Michael Dobler, Ursula Schwientek, Christiane Rosenberger, and Elja Friedman.
Oh, and some new employees in February 2010 are Christina Sitte, Manuela Müller and their trainee Jessica Bordeau.
Plus, a “handful” of authors: Sean Hodge and Mark Bloomfield (their first external authors), Elena Gafita, Jos Buivenga, James White, Frederick Townes; their regular authors Steven Snell, Jacob Gube, Vailancio Rodrigues, Jean-Baptiste Jung, Chris Coyier, Noura Yehia, Aquil Akhter, Danny Outlaw, Paul Boag, Chris Spooner, Dmitry Fadeyev, Cameron Chapman, Glen Stansberry and Matt Cronin to name a few.
High-Quality Free Content is Expensive
As you can see, there’s a lot of hands in the cookie jar. Smashing is just one example of the freemium model and the struggles involved with balancing the need for revenue with the desire to serve the community for free.
So, please take all of this into consideration when thinking about their recent changes and those of any other blog or internet company that has people working hard to produce free content or services.
If you’d like to support Smashing Magazine, they are asking for your help.
Dan is the Editor of Fuel Your Coding. He is driven by a passion for design and engaging with the creative community. You can check out his personal site: http://dandenney.com or follow him on twitter http://twitter.com/dandenney
Excellent thoughts, Dan. I’m not sure it was the best brand decision for Smashing to go the route they did (although they’ve certainly proven better marketers than I), I do think it highlights just how demanding we can be when it comes to quality content. Give me lots of awesome stuff and don’t dare hint you might need a little money to do it. Otherwise I’ll knock you off your pedestal on Twitter… or Facebook… or wherever.
Love the way you’ve dissected the issue and educated us all about the freemium model – good stuff!
I think too much free content trains your customers into a sense of “entitlement.” When you give it all for free they get pissed off if you start charging anything. Which is lame but there it is.
I support free sampling and giving people something free as an intro, but I don’t support CONSTANT free content. And those who expect it need to pony up some money if they want to continue to receive the content they want to read. Life isn’t free. We don’t live on a hippie commune but those who only consume free content and then expect more like you’re their content slave, obviously think we do.
I agree that it could be a trained behavior and that it is definitely lame.
The Doctype TV guys ran a post talking about setting the precedent that makes some good points: http://almost.done21.com/2010/03/setting-the-precedent-in-the-age-of-free
I wrote my own thoughts on this, but I have to say I don’t agree with how you are staging this. Indeed, the way things are setup for Smashing Magazine are expensive, but didn’t they choose for it to be that way? I don’t charge for the content on Drawar and (toot my own horn) read all the great responses I get to it. I’m fortunate enough to have advertisers who felt it worth their time to sponsor the content.
If you choose to expand and get big then you understand the costs. Don’t tell me we all do this for the love of the community. Sure I enjoy giving back, but 99% of us get into this for business reasons and if you don’t understand business principles enough to know when you can expand and when you can’t then you are missing something.
I no way is Smashing working on a Freemium model. They aren’t offering their content for free with better content being sold. They made a book and now they repackaged some of their blog content into an e-book. Freemium would be more along the lines of having a premium content section or memberships that give you more stuff to enjoy.
Coming from someone who runs a community of his own I understand the need for money, but the approach Smashing took in my opinion was the wrong one. If you plan on starting a business, even part-time, online with a blog/site then you need to understand what you are getting into because when the time comes and you are desperate for money, don’t blame the community if you can’t keep up.
The community is what got them those ad dollars in the first place so let’s stop pretending there is a great free service going on here. I love Smashing for all they do so this comes across as harsh, but I feel that the many people who read this will get the complete wrong idea about what it really takes to run things online. Running a content site isn’t a tough business. You understand your costs and rarely do the expenses grow exponentially from month to month. If you are bringing on more people than you can handle then stop bringing them on. If you are overpaying for content that isn’t bringing in the ad revenue you thought you would then find cheaper content.
The FUEL network runs on ads, are you guys suddenly going to shut up shop and proclaim that since you have decided to give us content free for a while that we now owe it to you to pay you back for it? Finally, let’s be honest, none of our content sites are needed on the web. If we fail because we can’t keep them up due to financial reasons do you really think the community will be missing us a couple months from now?
What about Brand Loyalty?
What about it? Do you really think brand loyalty is that strong on a content site? It’s one thing to be loyal to a car brand because their cars never let you down and you like their prices. It’s another thing to pretend that we can’t find similar content somewhere else in the matter of seconds. Loving an online brand is one thing, but loyalty doesn’t extend very far when everything is free.
I completely agree with all of your points about running a blog as a business. Where I disagree is that 99% of us are blogging for direct business purposes. You and I may know that every post has a “long tail”, but that doesn’t hold true for others. We are part of a very eclectic community and I would argue that the percentage of design-based bloggers that are ingrained with great business tactics is low.
I’m sticking to my story, in that I believe that the Smashing team is primarily driven by passion to do more and do better, which led to a tough business position. It appears that scaling issues and business models took second place to top-quality content.
While I am a huge fan of your posts, there is no way to compare the two communities. You have said from the beginning that you are the curator of the Drawar community and you post whatever you want to speak about, even weighing in on the type of content that Smashing puts out.
In response to massive browbeatings of list posts, they have dug in and tried to provide rich content. This was not their original approach and they have hit a bump in the road with scaling and financing the new path. Could it have been handled in other ways than it was today? Absolutely. However, the way it was handled for a few hours today isn’t the problem.
The real problem that we are all going to end up facing is how can someone run a majorly successful, rich content site without directly charging. Or, whether it can be done at all. This issue is way bigger than Smashing Magazine and it will affect the entire community in the very near future.
Here is the problem Dan, let’s pretend that they are making $15,000 a month. I have seen mentions they make anywhere from $20k-$50k a month. Do you really think you can’t run a site that has nothing more than an article a day and a forum on that kind of budget? Also remember that at the beginning they wrote their own content.
They are able to avoid the list posts because they now own Noupe.com which is nothing but list posts. Even then they still do them from time to time. Nobody is asking them to pay authors to write their content or require them to post something new every single day. Maybe cut back and write more of their own stuff or cut back on posting on the weekends.
If you really think you can’t run a successful site on $15k a month then I’m not sure what to tell you. I know hundreds of people that if you told them they could make $15k a month just from posting articles then they would easily spend 6-8 hours a day doing the research and pumping them out.
If I was guaranteed $5k a month do you know how much stuff you would see at Drawar? It would be insane. The problem is you can’t pretend you are a high end business and bring on multiple employees unless you scale your business. Smashing Magazine is good at what they do and that is posting articles. They do one a day and that isn’t a 7 person business.
I got back in the design community because of Smashing Magazine so I know every time I speak on this people look down at me as the one that is beating them, but I have been through this with 9rules and other sites and when I see someone pull a stunt like this without valid reasoning it is fishy. What happens when the book money runs out will they have to do this again? What are the long term fixes? If you can’t survive off the money you are making now and continue to plan on paying people and posting daily then what is going to change on your end?
This isn’t a hard business so let’s not pretend it is. We like to think so because we are in it and hate to admit that we aren’t performing rocket science.
Wow, the only part of that whole reply that I can argue against is that I’ve never thought (or pretended) that any of us were performing rocket science. Well said.
Thanks for this input- I agree wholeheartedly with your perspective here. I see Scrivs point that if you sign up for the eb and flow of free web content you should know what you’re getting in to. In the same vein, if you’re grabbing free content from a great site like smashingmag, then you should realize that yes, it’s free, so if they decide to take it down for a day for ANY reason, you have no rights to any of that content. We have a sense of entitlement to something that’s not ours at all. That’s like getting angry at a public broadcasting station for doing a day of fundraising (e.g. their telethon) when all they do is give us commercial free radio! It doesn’t make any sense to me.
The pbs example is spot-on.
Entitlement has been a pretty heavy word today, for sure. There are a lot of unwritten rules on how the people in charge of a community-driven site should act. Being on both sides of the fence quite regularly, I don’t have a definite stance.
Imagine if Twitter did this. I know it’s different, since it’s an app for communicating, but where does the line get drawn?
Completely free content and completely free services make for a very shaky rules system.
Sorry the PBS example isn’t spot-on because you don’t see ads on PBS. They do fundraisers because they really are giving us content for free. They make money by asking for it. Smashing Magazine is plastered with ads and has a job board that you pay to post jobs on.
Twitter doesn’t do ads (in America) and is free. If you are going to say completely free then make sure it really is completely free.
I guess “free” comes from perspective at this point. I completely consider Smashing Magazine (and Drawar for that matter) to be free. I have never paid a penny to visit or learn from them. Seeing advertisements is not a cost to me and I have never clicked on the jobs board.
If I woke up tomorrow morning and either site was discontinued, I would not feel entitled to the content that was once there.
Radio ads are delayed gratification, which I do consider a cost. I have to listen to commercials for a set period of time in order to hear another song. PBS has no commercials for a long period of time and then runs one day of delayed gratification, requesting funding to go ad-free for a while again. Today, we faced delayed gratification. Yes, there were already ads on the site but they never stopped you from getting to the content immediately.
Twitter does ads. They’re small text, mostly internal, and again are of no cost to me.
PBS also gets public funding (which I am happy for!) so it’s not free.
I think the larger uphill battle is more about keeping the content secure (torrents) and customers fears of everything going subscription based. People are used to paying for cable and getting 800 channels and that mindset carries over to the internet. (Even if they are totally different.)
Say you visit 10 sites regularly and now they all charge $10/mo. That’s asking customers to pay $60 for access to the internet and $100/mo more per month to get information, albeit higher quality, they can get elsewhere. I don’t see this working out well.
I agree and I don’t have a solution. I would go busted if I had to pay $10 a month for each of my RSS feeds, let alone all of the blogs I visit via Twitter per month.
I certainly hope that Smashing is able to make it through this. I think they put out some fantastic content and they have done so on a consistent basis for a very long time now.
The biggest “red flag” that I see in this particular situation is that they seem to be asking for income from visitors because they have expanded their operations and thus need to pay for more overhead. While growth is important, this highlights the importance of not growing too soon, not taking on too much overhead, and making sure you have a business model in place that’s going to support growth.
Good luck guys!
Yeah, that “red flag” came out later. I started the post while we were still being redirected to the book page.
I still don’t fault them for wanting to finance bigger and better things, though there were definitely options on how to approach it.
“Not growing too soon, not taking on too much overhead and making sure you have a business model in place that’s going to support growth” sounds about right :)
Perhaps Rupert Murdoch knows exactly what he’s talking about.
Next stop – iPad subscription to Smashing Magazine. Put it in your calendar.
Along with design work, I’ve just started supplementing revenue streams with graphic design and other iPhone apps (search “font combos”). This makes it possible to provide a product rather than just content to the design community. Good content is very hard to come up with. List content is much easier, but has much less lasting value. But a product a designer can use, that is something entirely different.
Freemium and iPad (and other platforms)…here we come!
Douglas
I believe that he does.
The “list content” vs “good content” is likely what started all of this. They were taking it on the chin for a while on being the “list content” site. Creating deeper content requires a much different model.
Good luck in your endeavors!
This article is related to the reality of “the cost of free” but on an individual blogger level, not just the larger sites:
http://bonfx.com/top-10-annoying-graphic-design-bloggers/
Nonetheless, the pattern fits.
I think that asking for help it’s not bad, if they do it, and we get benefits from the information they’re publishing, we must help, If we don’t, then we should not call ourselves community but selfish web surfers, because in a community everyone helps each other.
Very good article and I hope we can give back some of the good we get from smashmag, come on 10 dollars can’t buy a house, by the way I have my book now.
Thank you for chiming in and I love your thoughts on “community”. Hope you enjoy the book. :)
The community helped Smashing Mag to become as popular as it is – and enabled it to make $6000+ a month from job adverts and upwards of $15000+ on advertising a month.
The stunt pulled today will have generated ill feeling amonst some and wasn’t the best way to go about it.
People appreciate honesty – maybe they should publish the salaries of their staff and the roles they fulfil, alongside their income, before expecting the people who made that site possible dip in to their own pockets to help them again?
Well, they were honest, but they also blocked the content for a while which seems to be what has really set everyone off.
While we may look at the blog as a community resource, they are actually a private company now. I completely agree that there were countless other ways to approach it, but I wouldn’t want people’s individual salaries being posted. There are definitely approaches could have sparked more understanding and less spite, though.
“I think too much free content trains your customers into a sense of “entitlement.” When you give it all for free they get pissed off if you start charging anything. Which is lame but there it is.” What Zoe said is so true!
This is very reminiscent of the days when digital scrapbooking was becoming the big thing a few years ago. As a designer who used to sell I provided a few samples for free, but my free was a minimal – hopefully enough to show off my style and entice the customer to purchase larger kits or collections. Eventually many digi-scrappers came to expect regular freebies…monthly, weekly. Over time, even collections actually purchased were expected to include larger quantities, as people expected more and more for less.
No matter what we do it’s never enough for those wanting things for little or no cost, but we have to have a way to back up what we’re giving away. I sold products to cover the bandwidth and hosting costs and I did that from the beginning, which is how it should be done. Otherwise, it’s a bait and switch tactic that leaves a nasty after-taste.
This is great point on another major issue that is creeping its way through the community. The design resource sites are following this exact path. To lock people in to $9.95 per month subscriptions, more and more and more is getting put into packages. It has to come to a head at some point.
What I do is TOTALLY rocket science, and also brain surgery. But then my business model might be different. :P
What’s interesting about this whole thing are the numbers shown in this article:
http://cot.ag/cMoHs3
SM is rated the 11th most valuable blog in the world, with a pretty astounding estimated worth, so this whole thing does seem a bit odd. Although, from my conversations/emails with Vitaly Friedman, I did get the feeling that things were not going as well as they seemed over the past few months.
Hmm, I’m not sure where their data came from. That is the highest group of numbers that I’ve seen.
They are a private company and I haven’t seen any official revenue numbers released from them, so I’d take anything you see with a grain of salt.
I think Smashing Magazine is well within its rights to ask for help. Maybe instead of locking out all content for a day, they could have made their “help us” post a “sticky” post for 2 weeks or even a month. Enough conscientious designers would have seen it and bought the book, as I did. I also bought the Smashing Book, waited through the massively long delays (but forgave them) and I do all this because every week or so I find something on smashingmagazine.com that helps me in my job, which I’m getting paid for. Fair’s fair.
I would love to see SM try a hybrid approach — post an article (free) about a certain design concept or issue (or — shock! horror! — a list article), but accompany that article with source files, tutorials, how-to’s, etc that they can then charge for, maybe on a membership/subscription basis.
Yes! Exactly. I think this is the closest to the point of any of the arguments made so far. The only thing SM did wrong was to be a bit too strong with their request. It seems, from afar, that they were worried, even panicked and because of that, they made an error in judgment on the tactics of their solution. The subtlety of the solution. Asking for help in a normal post, with a tweet and a sidebar ad would have been strong enough to get some support, I’m sure of it. Did they get a few people this way that they wouldn’t have gotten the other way? Sure. But they also came off too strong. That was the only fault.
But complaining so much, even spreading hate about someone yanking your free content is laughable. I couldn’t believe the response from some people. SM did not offer an ‘essential service’, so by revoking their content, they did not hurt anyone. For this reason, the whole ‘they changed the rules of the game’ argument is unimportant – at best it’s a personal thing for people who don’t like change. They did not shut off anyone’s livelihood. If it felt like it for you, then perhaps you’re getting so much out of their posts that you should be helping them out anyway.
The argument that is important, surrounds the implications of their move. Some jump to conclusions and use the “with this move, who is to say that they wont do it again?” line right away. That’s not giving them any credit at all! It’s also reminiscent of old-school political fear mongering. What about the exact opposite? What if they made a mistake with scaling and business growth, needed a little support and can now carry on with a slightly new direction stronger than ever? We don’t know.
Yes, they monetize with ads and books. Do you have to buy them? Not at all. Did this latest move turn slightly away from that and stop you from accessing the content for a short while? Yes, and that was perhaps too strong. But it was a first offense. They’ve given a lot to the community.
I can’t really add to either of these comments, but they are great! Thank you for contributing :)
Just went and bought it, not as much for the content (it’s a few clicks away on their site), but to help them survive. I’d hate to lose such a good and FREE resource.
Glad to hear it!
The only problem is that Smashing Magazine isn’t ‘really free’, with every visit you generate money. If less people visit the site, less revenue.
It is their right to do whatever they want with the site and if that means they want to call us to our wallet, fair play. But they also have to accept that we call BS or wonder about their management skills. Which I do here.
Even with only $15k (compare to PSDTuts and NetTuts at BSA), this should leave ample leeway. Let’s assume for a minute that every entry on SM is paid $500, that’s $11k/month at 22 weekdays. Now we all now that now every entry on SM is worth $500 and we all know that their ad rates are higher than the estimated $15k (http://twitter.com/carlhancock/status/10892192114). What to do now?
Free resource and content? I accept that argument.
Not enough of money to pay the bills? BS.
Maybe they should hire a CEO who knows how to manage a company before hiring a large crew.
And I meant *NOT every entry is worth $500*. I need more coffee.
You make some very valid points, though all of the numbers that we can come up with are speculative. I’m sure that they have recognized a need to evaluate budgeting and structure at this point. I’m sure that they would not want to have to go through anything like this again.
I’m looking forward to seeing what they have in development.
I’m way late to join this conversation. Scrivs pretty much said I wanted to say.
Rather to repeat others, let me share this link
http://zenhabits.net/2007/06/help-me-become-a-full-time-blogger/
It’s a good example of how to ask for money.
Great example. It will be very interesting to see how things play out from here.
Great post and great conversation. I find this discussion interesting and quite helpful as I am working on creating my own content site(s). I am in the planning stages. So, this discussion is extremely helpful.
I’m really glad that this came in at a good time. As you can see, there’s lots to think about besides just producing “awesomeness”.
Good luck and be sure to share once you’re up and running.
I have been noticing the Freemium Model more and more lately. It makes sense, and can be a good model, so long as both the Free and Premium products are good products, and the Premium product offers significantly more that makes it worth the purchase. This can be really tough to accomplish.
I have also thought about the “Time=Money” over and over again. If only I could get paid for the time I put into my own websites and blogs, haha.
Thanks for the post Dan, it made me think, and that’s a good thing!
Thanks Ryan! Yeah, I just need to find someone that wants to pay me to do tutorials and check out css galleries. :)
They have now added this to their original entry.
Now I’m really confused because the initial splash page made it sound as if they were in financial difficulties and might need some saving. Now they don’t. The article wasn’t supposed to be a call for donations, but they wanted people to buy the book to help them out.
I really don’t know what to make of the situation. Actually I do know what to make of it, but I will hold that opinion to myself. I just think before they were sending a confusing message to the community and now they just made it even more confusing.
I am confused as well. The new message doesn’t correlate with the original message and tweets. I think that there is plenty to be learned from this series of events for anyone looking to change models.
Hi Dan,
I recently “discovered” your blog – and I absolutely love it! Very valuable info here.
I think there are pros and cons to freemium. One of the cons is that generally, if there is too much free stuff on the web, people will tend to expect things for free. So, it may be harder to sell stuff – depending on your niche and service, and also depending on whether there are free products similar to what you’re selling.