The Freerider problem (also known as the free-rider problem) is a phenomenon that occurs in many economic, social and digital areas. It plays a particularly important role in online marketing and web design, as companies, agencies and content creators are often confronted with users who benefit from a service without making a fair contribution. This article sheds light on what the Freerider problem is how it manifests itself in the digital sphere and what strategies companies can use to protect themselves against it.
What is the freerider problem?
The Freerider problem describes a situation in which one or more people benefit from a resource or service without participating in the costs or maintenance. It often occurs with public goods that are accessible to all and that no one is excluded from using. In the digital world, this means that users access content, tools or services free of charge, while others pay for the same services.
Origins of the freerider problem
The concept of the Freerider problems has been studied in economics and game theory, particularly in connection with public goods such as roads, education and environmental protection. The economist Mancur Olson described in his book The Logic of Collective Action (1965) how groups often suffer because some members do not actively contribute but still reap the benefits.
An example from the traditional economy is the use of public transport without a ticket - a person uses the system but does not contribute to its financing. This problem is transferred one-to-one to digital content and services.
The freerider problem in online marketing
Free content and the challenge of monetisation
In online marketing, many companies rely on Content Marketingto increase range and Customer loyalty to increase. However, this often leads to free-rider problems:
- Blog articles and whitepapers: Companies invest time and money in creating high-quality content, but many users read the content for free without ever using a service or buying a product.
- SEO and organic Traffic: Website operators rely on Search engine optimisationto generate free visitors. Many visitors consume the content without registering for newsletters or paid offers.
- Online courses and tutorials: Platforms such as YouTube offer masses of free educational content. Users benefit without contributing financially, while content creators often struggle with declining revenues.
Software, tools and Freemium-models
Many software providers rely on Freemium modelsto attract users. While some later upgrade to the paid version, many remain in the free version and use the product intensively without ever paying.
Examples:
- Spotify & YouTube Music: Millions of users listen to music for free with adverts, while only a fraction pay for premium services.
- Canva & Figma: Graphics tools offer free versions with limited functions that are sufficient for many users, so they never upgrade.
- Open source software: Developers do voluntary work on projects such as WordPress or Linux, while millions of users use them for free.
Free web design and free riders
Web designers are also faced with the freerider problem:
- Free templates and themes: Many users use free WordPress themes or HTML-templates and use them commercially without giving anything back to the developers.
- Open source code on GitHub: Developers make their code available, but companies often use these solutions profitably without participating in their further development.
- Free consultations: Many agencies offer free initial consultations, but potential customers often use the knowledge and then let someone else do the implementation.
Strategies for overcoming the freerider problem
1. Limited access & paywalls
A tried and tested means of combating free riders is the introduction of Paywalls or restricted access:
- Media platforms: Newspapers like The New York Times or Handelsblatt only offer a limited number of free items per month.
- Exclusive memberships: Platforms such as Patreon enable content creators to make special content accessible only to paying members.
- Premium functions: Many SaaS (Software-as-a-Service) companies offer core functions for free, but charge a fee for extended features.
2. Create incentives for paying users
Companies can reward paying users in a targeted manner:
- Discounts & exclusive offers: Those who take out a subscription receive additional bonuses.
- Community benefits: Forums or support groups are only open to paying members.
- Personalised services: Premium customers receive better customer service or customised content.
3. Clever freemium design
Freemium models can be customised to convert free riders into paying customers:
- Feature gating: Important functions are only available in the paid version.
- Watermark or Branding: Free versions carry a branding that can only be removed by upgrading.
- Limited use: A certain number of actions or storage space is free, after which a fee is payable.
4. Gamification & Community-Building
Gamification elements can motivate users to get more involved and actively support the platform:
- Reward systems: Anyone who actively participates or shares content receives points or benefits.
- Exclusive access: Long-term members or active users receive access to premium features.
- Badge system: Users with a high level of activity are publicly recognised as valuable members.
Conclusion: successfully overcoming the freerider problem in the digital space
The Freerider problem is a fundamental economic phenomenon that is having a major impact in the digital world. Especially in online marketing and web design, companies need to develop clever strategies to protect themselves against free riders and at the same time maximise the value of their services. Through skilful design of Freemium models, paywalls, gamification and incentives companies can master the fine line between free availability and financial profitability. Those who manage to strike a clever balance between free and paid services can be successful in the long term - without being exploited by free riders.