Free is the word of the year with books about it and more.  I recently wrote a piece on the business model known as “freemium” here.  Entire companies thrive on free such as Google, the reference standard.  I happen to be a fan of the free movement and the open-source concept.  I am not religious about it however.  I like it when it works.

I have no ethical or moral obligation to the free movement, only am fascinated by the development of economic forces and innovative business models.  I am, in fact, amused by the zeal of some “camp” members (the two camps being “free” and “anti-free”). So to this end, I write about the not-so-good side of Free.  The intent is to bring a balance to the concept, giving any aspiring entrepreneur or business owner the option to choose what will work best for them in their own circumstance.

This thought was sparked by a great article recently put out by Fast Company, here.  I will pull some concept from the article to further illustrate the point.

Google has been the reigning king of free for the last few years with its repertoire of freely available web tools and services.  I’m excited about the up-and-coming as well such as Wave among other things.  In the article, Fast Company takes a closer look at their new free operating system, Chrome OS.  Many have begun touting the damage it may do to Microsoft’s grip, particularly in netbooks and other low-budget systems.

Though digital prophets champion our pay-nothing future, it’s instructive to consider why free sometimes fails. To return to Google’s Chrome OS, sure, Google will persuade some computer makers to install the OS. But when you consider what free really buys, the answer is not much. The computers are likely to sell at $20 or so less than the price of comparable Windows machines (Microsoft sells Windows XP to netbook makers for just $15 a copy). In exchange for that slightly lower price, customers will get computers that do much less — they’ll run fewer programs and connect to a smaller range of peripheral devices. And good luck finding tech support.

Most consumers get it. There’s already a free operating system for computers: Linux. Yet netbooks running Windows outsell their Linux counterparts by a margin of nine to one. In other words, free is getting trounced.

It seems, in most cases, you get what you pay for, and in this case, that is service and support.  As is expressed in the article and by others, that simple $20 price increase will translate into millions in revenue which is solid incentive to not only provide service and support but to continue development and improvement over the long haul.  This idea has the feel of my views of entrepreneurship and perpetual “service”, making a venture profitable is not a bad thing!

Freemium may still be an answer

So Google wants to make their operating system free.  That may be the case and may not be a bad idea but I highly doubt you will get any solid service line in the event you have issues.  This may be resolved, once again, by the freemium model.  By simply creating an upgrade, that at least includes service of some sort, you may immediately mitigate many issues.  Guaranteed, a slew of new developer networks will emerge with the release, allowing users to sort through their own problems, and together.  For those who aren’t interested in this, there could exist this upgrade.  Is it the ideal model? I don’t know… but it makes free a little more feasible in this case.

This model basically exists with Linux and companies offering service for it, such as IBM among the bigger ones, and a countless number of smaller outfits I’m sure.  Combining the marketing and collaborative powers of Google with the development, distribution, and service upgrades, all under one roof, may prove advantageous on additional levels that are not seen with Linux options, especially in the general consumer markets (vs. commercial, technology markets).  All in all, it will be interesting…

What Else Suffers from Free

Other areas can suffer from free.  An example is quality lead generation.  This is on my mind as we have run into this quite a bit as of late.  If you have an e-book that you are interested in distributing for the purpose of generating prospect leads for the sale of your service, you have a few options to leverage it.  One, which is very popular, is to incentivize the potential prospect by giving away this great e-book for free, simply by filling out a form.  The other is to sell the e-book for $19.96, also capturing information.  Which is the better choice?  That depends on what you expect and what your goals are.

If you are simply trying to build a list of email addresses you can begin drip marketing to, then the first is obviously the right choice.  You will receive many more leads.  The problem with any incentivized lead (someone who is promised something if they sign up) is they tend to be a much more difficult close as your pitch is simply a technicality that they must put up with in order to obtain their free e-book (in this case).  They may have zero interest in your service but a lot in your book.  You may spend a lot of time attempting to discover a few good prospects.

With option 2, the sale of the e-book, you are left with far fewer names BUT these were actually willing to put out $20 of their own interest in order to get your book, let alone any great service deal you may have waiting for them.  You essentially use the sale of the e-book as a screening tool to eliminate the hassle of sorting through the muck later on.  Only those really interested will be buying your product, and ultimately, listening to your service opportunities (or whatever it is for you).

So, with free, traffic quality and lead quality may suffer but traffic numbers and total market traction may increase.  With not-so-free, traffic quantity suffers but quality of traffic and leads may be enhanced.  This completely ignores the secondary benefit of an additional revenue stream which may be some substantial icing on the cake if done right! In reality, you will likely have a combination of the two in a process we call the sales gravity funnel (for another time).  You may have a free product that captures information and builds traffic, at which point they are offered a very entry-level priced product that acts as gatekeeper and screens those with substantial interest.

The Conclusion

Of course there is no conclusion! I mean seriously… Do you think the answer is ever anything more than “it depends”?  Well, likely it will never be… You must analyze your business model in each circumstance and decide for yourself if FREE is for you.  Just be sure to not jump to rash conclusions or to do it just because it seems to be the trend. There are many who stand against being “muscled” into Free.  Charlie over at ProductiveFlourishing.com wrote a solid post on this as well titled “why creative entrepreneurs don’t need to worry about free”.   Spend some time analyzing the options and trends and make some firm decisions on where you want to go and how you want to get there, free or not!

What is your opinion on all the talk of “Free”?