I’ve read an interesting article at ReadWriteWeb about free content and giving away for free. I’ll start by saying I’m for the free content, and not against it.

It seems that more and more people are against free, and against giving away for free. This whole “for free” trend was probably started by Google. They had the search engine, they had the user-base, then they figured out they could display adds into the search results. And they were paid to do it. So they started displaying ads into mail listings also. Even though some argue that this is not good, I’d say it’s the key to the web evolution, and the key to our evolution: programmers, engineers, doctors, scientists, writers, and so on, can find a lot of useful information quickly and free. This was not possible 10 years ago, and it wouldn’t be useful today if the service was not free. Few people would use such a service if they had to pay for it. So you can’t argue that (at least) this free service helps our society evolve.

Why are we so afraid of receiving for free? Ok, we actually don’t get anything for free, we see the ads (more like ignore them, but that’s a different story) and for that we can use search, mail, access information all over the web. But guess what? We don’t care. I don’t mind that I see ads on the search results as long as I find what I want. And I don’t mind seeing adds next to my emails, as long as I have a 6GB storage in my Inbox.

Instead of being afraid of free, why don’t we adapt to free? Why don’t we work on changing the way we do business in order to stay competitive? Yeah, it’s easier to blame others when we feel losing ground, but instead we should adapt our business. This is one of the oldest rules of doing business, not just in the web, but everywhere.

I’m for free and because of these free services the advertising became what it is today. Because others give away for free we have to thing of better and more useful services just to stay competitive. And I wouldn’t mind getting free books either.

Advertising on mobile phones or How to create a user-centric community - the free SMS service. Why the “How to create … ” alternative? When I think about developing a service, I think about the users of this service and I ask myself: what would be their benefit from using this service (value added), what would make them keep using it (usability), why would they tell their friends about this service? And the most important question: “Would I use this service?” I think the best way to create a great community is to give people access to things that they already use or would like to use on a daily basis, and give it away for free.

Why?

I have started exposing the idea of services that split money with the users in Advertising Industry Crossroad - why not sharing the money with the consumers? I’ve also started to describe my business plan in Advertising and Communities - Developing a Business Plan. The first step in my plan is developing a free SMS service. This might sound pretty simple or unimportant, but SMS is the second most used service by mobile phone users, voice being the first. So it has a lot of potential. Advertising on mobile phones is a pretty hot topic these days so there’s already a need for this kind of services.

How?

Telf is a service which allows the users to send SMS messages for free. They can send as many messages as they want to as many friends as they want. All they need to do is log in, and they’ll be able to type the message, type one or several phone numbers, and click Send. Remember the holidays, when you have to send a lot of messages to your friends and family? It would be very simple to do it with this service.

Registration for the service I want to avoid “SMS spammers” so the service will be available only to registered users. The users will register, they will receive an activation code on their phone and they’ll use that to activate their account. And because this concept (of giving stuff away for free) is pretty new, the users will not be able to register as they register to a normal email or other type of service. The users will be able to join only by invitation (only at the beginning, until the service is well known). I want people to hear about this service and wish they were able to access it. So I’ll send invitations to 100 users, which will be my beta testers, and then I’ll give them invitations to send to their friends, and so on. I’m pretty sure a service that looks a little exclusive is more desired than another one with free access. Remember Gmail, it was in beta version for 2 years and it was available only by invitations.

Where do the money come from? I know, I haven’t told you yet how will this service pay for the SMS messages. It will insert short ads at the end of each message. One SMS message has 160 characters length, so the users will use 120 chars and the last 40 will be used for short ads. like “visit www.sergiutruta.com” or “open your own blog at…” or “visit the new club…” and so on. Each ad message insertion will be charged the cost of the SMS message. And that’s how the service will give SMS messages for free. The ads will be related to the message, so for example to a message saying “Let’s go to that new club that just opened” will be appended a related ad: “Visit www.clubs.com” or something like that. The ads will be contextual adds, related to the message. There you go, targeted ads And of course, the users will know when they register that short ads will be inserted at the end of the messages, in order to pay for the messages.

Will the SMS message recipients agree to receive the ads? The SMS messages are not unsolicited ads messages sent by Telf.ro They are actually messages sent from friends to friends. If I send a message to a friend saying “Meet me at the coffee shop downtown”, the final message might look like this: “Meet me at the coffee shop downtown. Telf.ro: Try the new Frappucino from Starbucks!”. It might look odd to the users at the beginning, but they’ll come to accept it pretty quickly.

The last, but not least It sounds nice being able to send messages for free to your friends from a web page. But what if I’m on the move? What if I’m waiting for someone in a coffeeshop or in a park? Well, I’m also working at a simple J2ME client which will be deployed on any java enabled mobile phone. That J2ME client will have a really simple UI, with a textbox for recipient’s phone number, textbox for message and a send button. When the send button is clicked, it will send the message through GPRS to Telf.ro, which will do the rest. This means I’ll be able to send SMS messages from my mobile phone really really cheap. Imagine typing the message, then typing 10 phone numbers, and clicking send. Normally it would cost probably 40 - 50 cents, but with this solutions it will only cost 1 cent or less, for the GPRS traffic.

In How to evaluate a Startup Idea I’ve described a criteria for evaluating a startup-idea. Here’s what Telf looks like analyzed through these criteria.

What effort is necessary to implement the idea?
As you can see the first page, it’s really really simple to implement. There’s a little more work at the profile area, where the users can send invitations, the publishers (the ones paying for their ads being inserted in the SMS messages) will be able to manipulate their ads and will know all the time what messages and how many of them have been sent. Also, the admin of the entire service will be able to manipulate users, publishers and global settings. I’ve chosen Ruby On Rails and it should take like a week.

Also, for the J2ME client, a midlet doing this is a 2 hours task. So no sweat here either.

What is the initial investment?
If we don’t count web hosting, no initial investment is necessary. At the beginning I’ll support the costs for the messages sent (I’ll promote my own products, of course ), and after I make sure everything runs as planned, I’ll start inserting ads from other publishers. For 5 cents a message, 1000 messages cost 50$, so it’s not a big deal while in beta testing.

How will the new service/product attract users?
I see two reasons that will attract users: sending messages for free and sending them directly from the phone or from a web page.

How will the new service/product make money?
If the cost for a message is 5 cents, I’ll charge the publishers 6 cents for each inserted ad.

Are there any other external dependencies?
There’s one external dependency. The connection to a company like Orange, Vodafone or others. Because they make money when the SMS service is used, I don’t see any problem here.

Once your service is running, what effort will it need from your side?
Very little, admin check-ups once in a while.

I’m only developing this service for Romania, so I’ll upload the source files for both the web service and the J2ME midlet and attach them to this article as soon as they’re working.

Advertising and Communities

A lot of the successful businesses have learned how to use two very important tools: the advertising industry, and the power of communities.

These both become more and more important and more and more powerful. Google for example became one of the mostly known companies in the world by making money from advertising. On the other hand, communities become more and more important, even to the point to decide the industry evolution or to help a company grow and evolve.

The purpose of the advertising industry is simple: taking the message to as many people as possible. It can use many types of media: television, radio, printed papers, internet. No matter how it propagates, the final goal is always the same: taking the message to more and more people.
The purpose of communities is always to grow by attracting more users. As they grow, communities gain visibility, they gain power, they draw attention and start to be heard and listened to.

When someone finds out how to join the advertising industry and the communities successfully, they have a good chance to develop a great business. Let’s take (again) Google as an example. They focused on the community first, they had millions of users long before they started thinking how to make money. When they found the solution with using advertising, their users community was growing so fast that it was pretty easy to predict where they were heading.

Nowadays, a lot of people look for successful solutions from combining advertising and communities. Though each of these two has at least one fault which have to be overcome in order to create a successful business.

The problem in the advertising industry is that people pay less and less attention to the ads. No matter what the ads are (video, audio, printed, text), people are getting better at ignoring them. One reason might be that the ad campaigns become more and more aggressive, so we have to protect from them somehow. On TV, when a show is stopped for ads, people start changing the channels. They avoid (consciously or not) being fed with more and more ads, so they start changing channels. The percentage of people who really watch the ads is smaller than the people watching tv. On the web, almost every page displays ads because it’s a good and easy way to make money. But the readers develop like a 6th sense and get better and better at reading the articles between the ads, without even noticing the ads.

In order to overcome this problem, the ads campaigns have get smarter and more interesting, in order to be noticed by people. The video ads have to present a story which sticks into our minds, the printed ads have to have more color and some layout that draws attention. The text ads have less possibilities to draw attention, and probably will be replaced by video ads. Though these are not real solutions, because as they become better, we become better at ignoring them.

In communities, drawing more users is pretty easy. Most communities attract users by focusing on general topics like cars, music, movies, blogging, sports, sex, money, or more specific topics like: bmw, porche, gm, ford (cars), football, basket-ball, baseball (sports), and so on. The more general the addressed topic, the more users will want to join that community. Probably the best topics for growing communities would be the ones addressing our needs: money and sex. With money we can eat what we want, we can drink what we want, we can buy what we want, we can go in vacations wherever we want, and so on. With sex, well…you know

My suggestion to solving these two problems is giving money to the users. I’ve already exposed this idea in Advertising Industry Crossroad - why not sharing the money with the consumers?. Let’s look at this now from the Advertising and Communities point of view.

Advertising: the money for ads will be payed without doubt to the ones broadcasting/displaying/printing the ads. So the costs are already in place and this will not change too soon. What if a part of these money will be payed to the users, to the consumers. Let’s say that displaying an ad on TV costs 2 cents for each user that sees it. What if 1 cent goes into the user’s account and the other goes into the television’s account. What if clicking on a link on a web page will make money not only to the page owner, but also to the reader, the one that clicked the link? What if seeing an add on the street can make me money, or hearing some ad on radio can make me money? The money are already payed to the television/radio/web page owner, so there’s no extra expenses. This might be a solution to attract more users. For example I see an ad on TV or on the street, I call a number, I answer correctly to some question, I get payed (this is not new, but probably was not looked at from this angle). Or I click on some links, I earn some money. Or I watch some video, I get some money.

Using this idea, I’ve developed a business plan for my startup, and I’ll share it with you. I’m mostly developing services for Romania, so it’s ok if you use my ideas for your own startup.

Developing a business plan

Giving users stuff for free might sound too weird and they might run away from your services (hey, we have to work hard in life in order to get what we want, right? ). So you have to be careful and do this in really small steps. Start giving them little things, of less importance, gain visibility and trust from your users. Then take it a step further and give them something else, more important, and so on.

My plan contains at least 3 phases:

Phase 1 - SMS Free Service
I’ve started developing a Free SMS Service. The users will be able to send text messages (SMS on mobile phones) to their friends for free. The costs will be supported by inserting short ads at the end of the message.

Phase 2 - Free music & movies download Service The users will have to watch an ad, and at the end they’ll be able to download a song. If they want to download a movie, they will have to watch several ads. Here you’ll have to make sure that they are watching the ads. Otherwise they might leave the computer and come back in 5 or 30 minutes and then download what they want.

Phase 3 - On-line making Service by watching video ads
If you can pay for music or movies when your users watch ads, why not giving the money directly to your users? And maybe you’ll find an ingenious way for them to make important amounts of money by spending only one or two hours in front of the computer.

The concept is so simple that it’s easy to find a lot of other applications where you give stuff for free to your users. They’ll be happy getting it for free, and the advertisers will be happy because their message gets to the consumers.

I’ll detail each one of the three phases above into separate articles.

Advertising

What is Advertising? What does Advertising focus on? What is it’s purpose? We all know the answers to these questions. Shortly put, advertising means letting the consumers (people) know of new products, services or even new companies. Every day we are fed different audio, video, pictures, banners, text or other types of adds on several information channels. What I want to talk about in this article is the efficiency of these information channels (from the advertising necessities point of view) and some simple ways to make them more efficient.

Existing types of advertising

The most known types of information channels, used also as advertising channels, are: radio, television, magazines/news papers and internet. Let’s say a few words about each one of these.
Radio ads are mostly listened to while driving. They are not the most efficient type of advertising, but they get the message to a lot of people. When we play radio ads, we have to make sure that the target people are the same or a big part of people driving cars.
Television ads are probably the most expensive type of ads. Even if the consumer likes it or not, an interesting movie or a tensioned sports game is interrupted for advertising. We’ve come to accept this and it’s almost natural now.
All types of magazines and news papers use 50% or their space (probably even more) for advertising. They are pretty much targeted ads because you’ll rarely see a dog food ad inside a business magazine.
Nowdays the internet is already a very efficient advertising channel. It has started displaying ads by using banners and pictures and links. Now the best way to advertise on the internet is by context ads, which are basically text ads which provide links to different sites with products and services.

All these type of channels have a very important characteristic: no matter the channel, when an ad is broadcasted / played / displayed / clicked, the channel owner will charge the ad owner. So all the money from the ad go into the channel owner’s pockets.

Problems with the existing type of advertising

Existing types of advertising get ignored by a lot of people each day. Some of us change the TV channel when the movie is interrupted for ads, some of us do not read or even look at ads inside printed magazines, and probably a lot of us have developed a sense in reading web pages without even seeing the ads (I know I have). How do we make people pay attention to our ads, how can we increase the efficiency and return of investment of ads campaigns? What can we do in order to make more people pay attention to our ads?

Solutions

Let’s think about Text Ads. They are probably the youngest type of ads. They tend to change a lot but something remains the same: who cashes the money. It’s always the one that displays the ads. These text ads haven’t embraced the Web 2.0 concept (I used this “Web 2.0″ tag because it’s so used these days that we all know what it means). They haven’t adapted to the “empowering people”, “collaboration” or “social networking” concepts. They have given power to the publishers, so they’ve made a few steps ahead, but they do not bring anything new to the readers, to the users.

The money on ads get to the channel owners without doubt. But you, as a channel owner, how can you make more people pay attention to the ads that you broadcast or publish? It simple: Start sharing the money with the users. Start giving money to your consumers. You don’t have to give your own money, you just have to take less than before and give to your users or viewers a part of the money that you’ve charged for broadcasting or publishing the ads. Is this a crazy idea? I’m sure it sounds like a crazy idea right now, but I don’t think it will sound like a crazy idea in a couple of years. Sharing the money with your users gives you the guarantee that they will start watching the ads. It gives you the guarantee that the users will start noticing the ads. The problem that you need to figure out is how to do that. How can you share with your users the money from advertising? How can you be sure that there’s no fraud? How can you attract people and also ad owners?

If you understand my suggestion and then figure out a solution, you’ll have your idea for a golden startup.