Freemium: the HD Map Business Model?

An earlier post discussed the HD map evolvement in China and reached the conclusion that to survive a cash-burning and time-consuming space with intense competition eventually comes down to a smart and sustainable business model. Here, I wanted to lay out some quick thoughts on the business model using Chris Anderson’s principles in his book “Free: The Future of a Radical Price”.

Anderson’s book was published in 2009 citing many web startups in that period. In retrospect it served up the golden rules in the mobile Internet industry, which emerged and boomed after web. Nowadays, perhaps the HD map also squares with the “free” theory.

“In a competitive market, price falls to the marginal cost. The marginal cost of anything digital falls by 50 percent every year, making pricing a race to the bottom.”

HD map as a digital product, its marginal cost is pretty much 0. More users don’t mean any additional cost. Instead, it would make crowd-sourcing update possible.

The HD map of highways and expressways are relatively easier to create and update. There is less room to differentiate among map vendors hence difficult to keep the price high.

With digital products, “monopolies aren’t what they used to be”. Quasi-monopolies pursue the max strategy (scale) to make their billions. For those can’t go max (and sometimes even when they can), “making money around free is a matter of creative thinking and constant experiment.”

The HD map of highways can be offered to users/OEMs for free in order to scale. The parts of urban areas are paid with strings attached. Users agree to constantly share data for vendors to update the map. In return, the benefit, which is a timely well-updated map, would encourage new paid users.

One of the freemium tactics is “feature limited (basic version free, more sophisticated version paid)”.

From the end product perspective (a smart vehicle), the basic ADAS features could be free, like FCW, AEB, and LDW. The advanced ADAS features are paid for and HD map is included. Tesla’s FSD package is an example of paid features although Musk is not officially supporting HD map at this point (Tesla could build one on their own eventually).

Either basic or advanced, we can imagine users would have to check the T&C box upon choosing an ADAS package, in which data sharing is a big part.

One of the free business models is “cross-subsidies (some customers subsidize the others)”.

Within advanced package, HD map is offered/priced by city but a full national highway map comes for free. In this way, the release of HD map and regulations can be synced on a local basis. As with a lot of the new things being adopted in China, pioneer cities do the experiment and other cities follow.

Last but not least, if freemium applies to HD map, it might apply to other aspects of autonomous driving technologies.