Freemium - Is Free Really Free?

Chris Anderson, the author of “The Long Tail”, discusses that soon, everything on the web will be free. He shows that the internet has enabled companies the ability to offer free services that were once expensive to make. He says the marginal cost of creating something on the web has almost reached 0. Wired wrote a great article on this Freeconomics and feemium theory.

I agree with Chris that many services are being offered for free because there are other ways to make money from it. A great example of this is when Google launched Gmail for free with over 2 gigs of storage. Why could Google do this while Yahoo and Microsoft couldn’t? The answer is that storage cost has almost reached 0 and Google had a way to monetize those readers by reading the content of the email and serving relevant ads next to them.

But is anything really for free?

My first job out of college was working with a small vertical search engine and the CEO at the time told me a story of how he taught his daughter the lessons of free.

One day while they were shopping at the grocery store, the daughter saw numerous advertisements for free pepsi. She said “look dad, free pepsi” and proceeded to grab the pepsi to put in her cart. The CEO said, “Honey, nothing in the world is free. We must either buy or give up something to get something in return.” She looked at him puzzled and said,”Dad but it says FREE PEPSI.” The CEO responded by saying, “Ok, then take the pepsi and walk outside with it.”. Minutes later the daughter was apprehended by security and the guard said, “Didn’t you read the small print, it said ‘Buy One get One Free.”

The lesson here is that nothing is ever for free. If you want gmail for free, you must allow Google to crawl your emails and serve ads next to them. Facebook is not free, you must give up your personal data and have ads shown to you. Craigslist is not even free. The self policing model of craigslist easily allows scammers and spammers to email you.

At the end of the day, we as a society will dictate what we want for free and companies will find ways to monetize it. Remember though, if you want something for free, be prepared to give something up.