Freemium Hardware Is Coming (and You Can’t Stop It)
It’s starting to happen now and is something we’ve written about before — Disposable Hardware. Did you know you can get a 10″ Android with 4GB of storage for $30 retail right now?
What happens when electronics become available at basically disposable price-points?
For one thing, new business models. Outside of subsidized mobile phones paired with annual contracts and the new Kindle Paperwhite ($119 with ads and $139 without), electronics products are typically sold without subsidies.
As the trends towards more powerful devices at lower price points continue, and technology makes its way into locks, light bulbs, smoke detectors and everything else in our lives (because hey, it makes make life better and doesn’t add much cost) we’ll start to see more and more hardware products that are basically given away — because the real money is in the software services.
In the startup world, Space Monkey is the best example of this emerging trend that I’ve found — it’s a one terabyte backup appliance for which consumers pay only a $10 shipping and handling charge and $10 / month service fee.
Giving away the hardware starts to make sense if you consider how much it must cost to print and mail a 75-page, glossy, full-color product catalog…something that’s been going on for years and has no analytics or ROI tracking built-in to make it efficient. Giving away $30 Android tablets doesn’t seem like a stretch, given the many more ways (virtual goods, freemium upsells, etc) that digital goods can monetize — not to mention estimating what a $30 Android tablet (equivalent device) will cost a few years from now.
Of course if hardware is cheap and powerful and can be given away then it will be used by the bad guys too. As BBC reported this week and discussed on Geek.com, Chinese irons and electric kettles were discovered in Russia that contained Wifi chips and microprocessors designed to find unprotected Wifi networks, presumably for the purposes of sending spam. As the cost of components goes down, as long as the online ROI of deploying at scale makes sense, it will happen…for good or for bad.
It will take a while for the regulators to figure this out and in the meantime, it’s the wild west.