There has been a bit of discussion this week about the relatively new business model of offering free goods and services. Google is perhaps the champion of this concept, although they are far from the only company subscribing to the free goods and services business model today.
Many print publications have gone into competition in the free media market, attempting to increase readership by removing the price tag and thereby increase advertising revenues. Unfortunately, because ‘free’ isn’t ‘new’ anymore, we have become somewhat desensitized to it.
“…Chris Anderson, recently posted a story of “free gone horribly wrong” written by Jon Lund, the head of the Danish Internet Advertising Bureau. It’s a fascinating and worthwhile read, all about a sudden influx of “free newspapers” in Denmark that weren’t just free on street corners, but were freely delivered to homes. Basically, it created a bubble, with everyone getting overwhelmed with multiple free newspapers delivered to their doors every day. The market was overly saturated and it hurt everyone and the whole thing collapsed…” continue reading
In his blog post, Too much free, Seth Godin explains why “free by itself doesn’t guarantee much of anything.”
That isn’t to say that offering free products and services is a bad thing to do. What we are seeing is the realization of the market that free alone isn’t necessarily valuable enough to grab our attention anymore. There once was a time when a free white paper or ebook was sufficient incentive to get people to register or subscribe or even purchase something else.
The line has shifted now. It is not that the monetary value of the free item has to be bigger today. But the real value of the free item has to be perceived as meaningful to your audience. If the free product or service has a real benefit value to people, then the value perception will be high. If there is no or little benefit to people, then the value perception of the free product or service will be low.
Where free does work, in my opinion, is in many software and web service environments. We offer a Free Edition of our GroupMail software. It is fully functional (although many of the advanced features are disabled) and people can download it and use it as long as they want, as much as they want. Many people use it for years without ever upgrading to one of our paid editions. That’s great.
Offering a free edition of your software or service helps to spread adoption. It is listed on free download sites, referred by friends and on blogs and social networks. Our Free Edition of GroupMail is downloaded about ten thousand times each month. Not just because it’s free. But because it is something that people can use in a practical and meaningful way.
Update:
Last.fm is transitioning from a free to a paid service in all but three countries (US, UK and Germany) where advertising revenues failed to support the free model. Could it be a good opportunity for some regional advertisers to rescue last.fm listeners outside of the US, UK and Germany from this shift to a paid subscription? Perhaps a marketing campaign by U2? We’re keeping Last.fm free for our fans in Ireland…
