The lure of free is attractive – free web hosting, free software or the free lunch always grabs our attention.
Deep down though we know there’s really no such thing as a free lunch and the same is true with all the other free deals, there’s always a cost of some sort.
Often the definition of free can be a problem; there’s the social media model of free that harvests your personal data, the Silicon Valley version that hopes a big company will buy the service, the earnest work of volunteers and the freemium marketing model.
Most computer users have used the freemium model, this is where the business gives away a basic free version in the hope of encouraging enough customers to the paid premium version that has support and additional features. Common examples are AVG Free Antivirus, Google Apps and Mailchimp’s Forever Free plan.
All of the freemium services come with a catch, AVG’s free software is only licensed for home use – so no using the free version on your office computer – while Google Apps only supports ten unpaid users and if you have more than 2,000 people on your mailing list then Mailchimp is no longer free.
Developing a free product to raise your profile is a common way for entrepreneurs to enter markets and establish a reputation. This is particularly common in the software and web design industries where coders and designers offer free applications or templates to build their portfolios.
These products developed by entrepreneurial designers and programmers are often great, but as there is the risk the developer will lose interest as their business evolves. The WordPress Guy, Tony Constantino, warns “when a free theme stops being supported in 6months you will get left behind”
By far the most lucrative free model to date has been the advertising supported business. This is nothing new as commercial radio and television stations have had this model for nearly a century, but Google have taken this online with their advertising platform that funds their search tools and many other free services.
A variation on the advertising supported model is the data mining carried out by social media sites like Facebook and LinkedIn. This isn’t as transparent and may be a problem for business users who don’t want to share their client details with an internet service.
Increasingly the free services are based around the Silicon Valley model of a deep pocketed venture capital company funding a business with the aim of building the customer base through offering freebies services with the aim of selling to a trade buyer.
The danger with the Silicon Valley VC model is its instability as most companies shut down without finding a buyer. Even when they do find someone to buy the venture the service often doesn’t last as we saw when the once popular free hosting service Geocities was shut down by Yahoo! in 2009.
Despite the traps free can be good for your business but you should understand the terms, conditions and hidden costs that come with the products. Often you’ll find paying for a product delivers a much more functional and better service that requires less of your time.
One service that might help businesses choose the right free or trial online services is Cheapstart, that compares the various services available for entrepreneurs starting out.
You made a very good point in your article:
Nothing is really for free – but the way of payments are shifting.
Until now, no one has found a way to make micropayments efficient and user-friendly, and many Freemium app vendors are struggling with low conversion rates. The company, Kachingle, has solved both problems with their patent-pending, micro-payment platform. (http://www.kachinglepremium.com)
Kachingle Premium has solved a big problem of the Freemium world, along with the power of Crowdsourcing — especially micropayments.
Kachingle Premium bundles complementary PC- and Web-premium applications at an irresistible price point, enabling app vendors and marketing partners to offer these bundled premium apps to (currently) free users.