Free is an intoxicating word. It captures the attention. It promises, it titillates, it teases. And ultimately, it disappoints.
And yet some businesses, especially ones that live in the digital arena, embrace it, use it as a business model. They promote free because it allows rapid, even rabid growth. It can ignite Metcalfe’s Law, the very core of what drives the Internet’s success. By rapidly adding customers, clients, and users of their products and services, businesses can attract funding, and ultimately, hopefully, a business model that generates money in some way.
Metcalfe’s Law, an observation made in the early Internet era, is that the value of a network dramatically, exponentially increases as the number of connected users (originally, connected devices) grows. That is true. And to springboard a company into rapidly adding connected users, companies often resort to giving away their services.
But ultimately, free fails.
We all know “there ain’t no such thing as a free lunch.” In a very real way, it’s fundamentally how the physical universe functions. You can’t get something from nothing. Literally. You cannot create matter or energy — you can only transform one into the other. And we thinking beings are naturally suspicious of free. But we’re also secretly hopeful that this time we really might get that glorious something for nothing.
Free can work, for a short period of time, perhaps even decades, but only when it hides something else that is the true business model. We fall for the con over and over again. There’s always a hidden cost built into that business model, and unfortunately, that hidden cost is almost without exception advertising and the loss of privacy. For decades advertising was omnipresent, on TV, in magazines, on billboards. Everywhere. It seemed innocuous. It was blasted out at us, all of us, a wide net trying to collect a few customers. Frankly, that was OK. We could live with that. But now advertising is focused, based upon detailed profiles of individuals. Advertising tracks you, targets you, seeks you out. It’s often said that you are not Google’s customer, you’re their product. This is more true than you might imagine.
The giants of the market today, Facebook and Google, both succeed by providing something free. Broadcast TV succeeded for years by providing programming free to anyone who could receive their signal, while collecting advertising fees from sponsoring companies. Those same TV networks are discovering that advertisers are fickle. The model doesn’t work forever. Something better, freer, will someday come along. And here’s the hard truth about free: if someone offers you a free something you want to keep on receiving, you’ll eventually be sold to or sold out.
Google announced that their motto, their mantra, is “Don’t be evil,” but that simply isn’t possible when their business model is based upon collecting detailed surveillance of the bulk of humanity and the selling of that spy craft to the highest bidder. It’s our worst distopian dream made real. At least Facebook doesn’t claim to not be evil. Their clear goal of tracking everything you do is completely undisguised. It’s both refreshing and frightening, but no less evil.
If you give away your product or service for free, it is next to impossible to begin charging for it in the future. Many have tried and failed. Recently Netflix has been pummeled by customers and the market because the company split off and began charging for a service that they had been providing free. But to grow that same service from the start by charging for it would have taken longer, given others a chance to compete. So they took the shortcut of free and now they’re paying the price. [Note: after I wrote this piece, but before it was published, Netflix announced that they were abandoning their plans to split off DVD rental. We'll see if they backtrack on pricing, too.]
If free isn’t the answer, what is?
From my perspective it’s slow, limited business growth. Real products and services with real value, provided at reasonable costs. Create something new and sell it. Strange, no? But in the long run, that’s what works. If you offer some service, even some wildly popular service, and provide it free while selling out your customers, eventually, inevitably, someone else will steal those customers away.
Or maybe, hopefully, people will one day wake up and refuse your offer of free in exchange for intimate knowledge about everything they do.
But it’s free! Thanks, but no thanks.
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I think what a lot of developers neglect is having a nice trial app. Some trials are so watered down, and ugly-fied with ads or ‘rate me!’ alerts, that it becomes off-putting altogether.
Instapaper is an excellent example of a trial done right. Marco Arment has really thought out which features to include, but providing enough incentive to go for the full version, and that’s a developer who cares about his customers. How can you not want to support that?
I think that full featured trials are an excellent idea. I go into them understanding that if I like it and want to use it, I’ll need to pay for it.
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