AR Classics: Can freemium research be better than free?

The birth of freemium analyst research

The growth of free and freemium analyst research is a fascinating development. In a way, it’s an acceleration of what we’ve seen in the analyst industry, previously, in the form of White Papers. Often White Papers were working well for both analysts and vendors. Increasingly it’s fascinating to see this kind of snowballing development, particularly from smaller analyst firms trying to establish themselves by giving away their research.

It’s interesting; Chris Anderson, the journalist, is well known as the author of ‘The Long Tail’, and the point he’s making is about situations when the marginal cost of something is pretty much zero (for example, access to a report, it costs you less than a cent to give it away). If there’s no opportunity cost, then the intelligent thing to do is to treat it as zero and try to give it away to sell something else.

Many analyst firms are starting to see two other things that free stuff can help sell. 

  • First, it can help sell their consulting services. 
  • Second, it can help sell things for vendors. 

That’s why, if you look at the organisations that are giving stuff away, either they’re doing it to expand their direct or indirect channel into the market and help people identify solutions that their consulting services can help. Often, they are giving away information that helps people identify problems in their organisations, for which analysts consulting services are the solution. Of course, there’s also the other side that often you get organisations, like James Governor’s Redmonk. Often, a large part of their revenue comes from vendor organisations sponsoring analysts, and hoping that what they will write will help develop the market for the technology solutions that those vendors are generating.

So, when you’re giving something away free to sell something else, you can either 

  • sell something else (to the people who are consuming what you’re giving away for free), or you can 
  • sell something else to somebody else whose incentive it is, is for you to give it away. 

In the same way, in a bar, they will give away salted peanuts because that makes you thirsty, not in the hope that you’ll buy more salted peanuts!.

The goal is that it’s a marketing tool that stimulates the demand for something else. But then there’s also a kind of footnote. If your research doesn’t help sell something, then, actually, it’s tricky to persuade somebody else to pay you to do that research. Imagine, if you will, the kind of analyst that comes out with bad news, or cautious news: most of the vendor community, a significant backer of analyst firms, isn’t going to be paying you to say that. So it isn’t easy to see how far objection-supporting research will scale. Analyst credibility, of course, is very uneven. Some free stuff comes from absolutely fantastic people with great insight, but others come from people whose reputation isn’t strong.

I think it will be fascinating to see what parallels we can make with the traditional news media. If you think there are some news media who have been very successful picking up large scale advertising. That allows them to subsidise the cost of their print periodicals, and also to give away online the news that they have, and then, perhaps, at a more senior, more sober part of the market, you also see other organisations that aren’t able to collect the same amount of advertising. They still need to have substantial cover prices to encourage subscriptions and because they can’t give away all their content online economically. So, you know, if you think of The Economist, you know that’s pretty expensive if you buy a single copy in a newsagent. There’s not a lot of that content available for free. That’s not the case of I’m looking on the website of The Mirror, or Bild, some mass circulation daily. Then, of course, it’s very inexpensive to buy at my local subway station, and, of course, almost all of the content is available for free online. That’s because the revenue is coming from advertising rather than from readers. We’re seeing the same trend in the analyst industry in some ways.

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2 replies on “AR Classics: Can freemium research be better than free?”
  1. Exactly right, there is no such thing as a free lunch. Free research gets paid for either by a vendor commissioning it, or because you hope to sell consulting off the back of it.
    When the term ‘open source’ analysis was floated a year or two back, I was concerned when I heard end users pick up on it, and actually understood it to be akin to open source community software. It is not.
    I think there is room for free content – just as we have always had white papers. But my concern remains for those buyers and end users who do not know the difference, and base critical buying decisions on such work. I have been around long enough to see horrendous buying mistakes made, based on research that buyers thought was ‘independent’, that they got at low cost or free – that was little more than vendor marketing.
    So, two things – one I agree we will see more and more free research. Some of it will be good, some of it bad (just like paid for research). Second, I think it may become more difficult for end users to figure out what lies behind the production of the free research – further confusing and already muddled market.
    I admire the ‘analysts’ who openly state their intentions and business models (for example Redmonk) – but they are in the minority.

  2. Hi Alan,

    Yup, I think we look at this the same way. Research can only be given away sustainable because it’s being monetized somewhere else.


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