Consumers are dramatically benefiting from the freemium model of sites with research indicating a gap between what consumers are willing to pay and there seems to be a set threshold. According to research conducted by McKinsey, “”Only 20% of internet users choose to pay for at least one online service such as media entertainment” with suggestions inferring that “…only a price drop will increase the numbers of those willing to pay.” How sustainable is this getting more than giving practice? European market research numbers are indicating that consumers on average are getting about â‚¬10 more a month in value, or in other words taking â‚¬10 in value from providers.
Online advertising in Europe specifically estimates that for every â‚¬1 spent in advertisement the consumer gets â‚¬3 worth of services. Seems like a small amount? That’s nearly 300% in value gained by the consumer; or by other calculations a â‚¬100 Billion Euro surplus for 2010.
When looking at the details of recent surveys abroad its clear that consumers are absorbing “nearly 85% of the total surplus linked to Web services.” What if all this free stuff started to get charged for? According to McKinsey customers would be lost quickly:
“The study suggests that if those services that are currently provided for free were to be charged for (at a level that generates the same amount of revenue as ad-supported services), at least 40% of current users could stop using the internet.”
Certainly the online advertisement business will need to change how it interacts with consumers but the statistics are staggering as to what the actual bandwidth and value of an online consumer really is. Also it should be noted that “ad-funded services are not losing out per se; if it wasn’t for these large constituencies of free users, the audience for their ads would be far less.”
More for less, less for less. What is the internet going to do with all these non-paying online consumers? Is there a breaking point?