Free isn't a Business Model, But it is a Business Strategy

I saw Chris Anderson, the author of the book Free, speak at the Network Solutions GrowSmartBiz conference.  I also got a free copy of his book, which I read on the airplane coming home. 

After reading the book, I'm quite surprised at the controversy it's generated.  It is being actively debated on the Internet. Malcolm Gladwell ripped the book in a New Yorker article.  And according to the bMighty.com (one of my favorite small business tech sites) article Free vs Not Free, the very smart folks at 37signals consider it a sham.

I don't get it. 

Free has been used effectively as a business strategy and marketing tactic for pretty much as long as businesses have existed.  Given how widespread and successful free is and has been, I don't see how you challenge the concept. 

The only place I see room for criticism is if you think Anderson is suggesting that free is a complete business model.  Obviously, if free means no source of revenue then it is destined for failure.  But I don't think this is what Anderson is suggesting. 

I think the point of the book is free can be very effective as a marketing tactic, business strategy and/or part of business model. 

This blog, for example, is free.  And despite the fact that we will never monetize the vast majority of our readers in any meaningful way (we do get pizza and beer money from advertising), it is an important part of our business strategy and an effective marketing program. 

Freemium business models - giving goods or services away to a lot of people in hopes that a subset to pay for something - have also proved to be effective.  Software companies like Evernote, Intuit and others have had success with this approach.  Free samples fall into this category and have obviously been successful. 

And third party payer business models are common.  This is what advertising uses.  We get TV for free - the advertisers pay for us. 

The reality is free has been around a long time and is here to stay.   And as the digitization of our economy continues, there will be many more opportunities to use free as a strategy or tactic because of lower marginal production costs.  This, I think, is the point of Free. 

***Update*** When I wrote this post I had not seen Steve Balmer's comments on free.  He also said Free is not a business model, but as TechDirt points out Microsoft uses free as a business strategy on a regular basis.

Comments

[twitter.com/smallbiztrends]

Agreed, Steve. Free is not a business model -- it's a marketing technique. Not even always a strategy -- sometimes a mere tactic.

I thought the book Free had good insights, but I would have preferred that it not contend that giving away something for free was a new economic model (...shades of the DotCom era and the so-called "new economy" and all that).

[Steve King]

Anita: Good point about the dot comm era.

I'm not sure how many remember that free was a big mantra during that time. I think we pretty much proved that no revenue doesn't work very well back then.

Unless you got acquired for huge sums of money despite the fact that your company had no hope of success.

I miss those days...:). Great parties too.

Steve

[jason]

After reading the book, I'm quite surprised at the controversy it's generated.I m aggred with your openion.
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