In the computer world, free is often the architecture and economic model of choice or is it?
We have various operating systems like Linux, Chrome, Android and more now costing nothing. Information is free on the Internet. Online news at no cost to the reader is causing shock waves in the print news world. There are thousands of free downloads available online for applications, games, music, and more.
What type of business model is free—where is the revenue generation and profit margin?
Yes, we know you can use giveaways to cross sell other things which is what Google does so well making a boat load of money (billions) from its free search engine by selling ads. Others are trying to copy this model but less successfully.
Also, sometimes, companies give product away (or undercharge) in order to undermine their competitive challengers, steal market share, and perhaps even put their rivals out of business.
For example, some have accused Google of providing Google Apps suite for free as a competitive challenge to Microsoft dominant and highly profitable Office Suite in order to shake one of Microsoft’s key product lines and get them off-balance to deflect the other market fighting going on in Search between Google and Microsoft’s new Bing “decision engine.”
So companies have reasons for providing something for free and usually it is not pure altruism, per se.
But from the consumers perspective, free is not always really free and is not worth the trouble.
Fast Company has an interesting article (October 2009) called “The High Cost of Free.”
“The strategy of giving everything away often creates as many hassles as it solves.”
Linux is a free operating system, yet “netbooks running Windows outsell their Linux counterparts by a margin of nine to one.”
“Why? Because free costs too much weighted down with hassles that you’ll happily pay a little to do without.”
For example, when you need technical support, what are the chances you’ll get the answers and help you need on a no-cost product?
That why “customers willingly pay for nominally free products, because they understand that only when money changes hands does the seller become reliably responsive to the buyer.”
And honestly, think about how often–even when you do pay–that trying to get good customer service is more an anomaly than the rule. So what can you really reasonably expect for nothing?
“Some companies have been at the vanguard of making a paying business of “free.” IBM, HP and other tech giants generate significant revenue selling consulting services and support for Linux and other free software to business.”
Also, when you decide to go with free products, you may not be getting everything you bargained for either in the base product or in terms of all the “bells and whistles” compared with what a paid-for-product offers. It’s reminiscent of the popular adages that “you get what you pay for” and “there’s no such thing as a free lunch.”
Sure, occasionally there is a great deal out there—like when we find a treasure at a garage or estate sale or even something that someone else discarded perhaps because they don’t recognize it’s true value—and we need to be on the lookout for those rare finds. But I think we’d all be hard pressed to say that this is the rule rather than the exception. If it were the rule, it would probably throw a huge wrench in the notion of market equilibrium.
And just like everyone savors a bargain, people are of course seriously enticed by the notion of anything that is free. But do you think a healthy dose of skepticism is appropriate at something that is free? Again, another old saying comes to mine, “if it’s too good to be true, it probably is.”
Remember, whoever is providing the “free” product or service, still needs to pay their mortgage and feed their family too, so you may want to ask yourself, how you or someone else is paying the price of “free,” and see if it is really worth it before proceeding.
From the organization’s perspective, we need to look beyond the immediate price tag (free or otherwise discounted) and determine the medium- to long-term costs that include operations and maintenance, upgrades, service support, interoperability with other products and platforms, and even long-term market competition for the products we buy.
So let’s keep our eyes open for a great deal or paradigm shift, but let’s also make sure we are protecting the vital concerns of our users for functionality, reliability, interoperability, and support.