The PRICE of FREE

The idea of offering your product or a version of it for free has been a source of much debate. What is FREE and is FREE really, really, free as in gratis?

Idea on writing this article came from reading this article on “Minimum Viable Free Product (MVFP)” by Nathan Taylor. Nathan is talking about “Minimum Viable Free Product” and I personally don’t like how “Free” is interpreted.

Yes, I did read the book of Chris Anderson about the free products. But the Internet decided to do things quite differently.

Let’s define the terms before we go into the discussion.

Terminology

FREE = means that a product has a zero acquisition price: it doesn’t cost anything to install/use. Nothing is said about what happens after you install it.Note also that this doesn’t say anything about what is being sold: MVFP or freeware or ad sponsored or… you name it, It is just “something” that doesn’t cost anything, and it doesn’t say if it is the “full” product or an “entry level” product.

Free trial = this is the full product offered for FREE for a limited period of time. After that, the product either stops functioning or reduces the functionality to an “entry level” product.

Minimum Viable Product (MVP) = As described and used by Eric Ries. Wikipedia says:

The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.

An MVP is not a minimal product (minimum of features you can implement until the deadline as most companies understand it), it is a strategy and process directed toward making and selling a product to customers. It is an iterative process of idea generation, prototyping, presentation, data collection, analysis and learning. One seeks to minimize the total time spent on an iteration. The process is iterated until a desirable product/market fit is obtained, or until the product is deemed to be non-viable.

Why FREE is never free

First, we need to have a look at the business models behind “free”:

1. Bundling with hardware, software.

Software: you download a software and the installation package or the software itself offers you to install additional software. Sometimes related to the software you want, but most of the time not. The producer of the software you want will get some pennies from the distributor of the software offered as “extra”.

There is an entire industry built around this concept. There are frameworks that allow you to package your software in such a way that additional software is bundled dynamically based on the situation on user’s computer. For example, if the framework observes that you don’t have Chrome, it will offer it first. If you don’t have an archiving software it will offer you Winrar or similar. And so on… The authors of the framework get money for the user installing the bundled software and the company offering the original software gets a share of that.

Hardware: you get a device (iPhone, Android, game console) and you get automatically some software preinstalled. Sometimes you can’t even uninstall it.

2. Bundle with ads

This is like bundling with software, but the ads are not useful for you. They are inserted in various places where you click with or without intention.

There are initiatives to make ads “useful” and not frustrating. But, these are local, product oriented initiatives and to my knowledge, there is no global initiative that might change the market.

3. Freeware – you get the full product for “free” and you will have no choice later than to buy support services. Or learn how to deal with the software – for home users and small companies it is easy to do that. For an enterprise, it is not possible.

There are versions of freeware which allow you to evaluate for a certain period of time the fully featured product and after the trial is over the product switches to the free version and remains like this.

4. Freemium – “free” basic version, charge for subscriptions, extras and for addons.

Again, you get “something” for free, and the business model behind that product is going to do everything possible to make you pay. And, if you’re not going to pay, then they will make sure that they use your behavior to learn more about their customer base. Their plan is sooner or later, they will get you to the point where you pay.

Special category: Free 1 year then charge below 1$ price

Whatsapp created a new business model which is no longer “free” but it is as closer as it can get. They allow everyone to use the app for free for the first year and afterwards they charge under 1$ per year. There are millions of apps outthere that do the same. But, to my knowledge, I have not heard of another one which starts as pure free and then charges such a low amount of money.

What is the price you pay?

In all above models, the user is targeted in various ways to pay directly or indirectly (ads, pay per click, pay for eyeballs). While these costs are usually ignored by the users as they are not paid by them, they prove to be annoying in time.

This is the most worrying part in offering something for free. Where is the limit of how much you disturb the user experience and how much information can you get from the user. While for the second there are privacy laws which tend to be respected in time, there is no golden rule for the first one. Too much ads will drive users away on the long term while increasing the revenue on the short term.This is the art or experience that a good product manager has to bring. The only thing I can advise here is: experiment, gather feedback, react and change.

And, yes, sometimes it is annoyance that is the cost and the company will try everything to make you pay to get your “piece of mind”.

Sometimes there are hidden costs like those when trying to achieve security for free as mentioned in this article “Security for Free ?” I wrote for (ISC)2 blog:

As a general conclusion, it is true that it is possible to achieve a decent degree of security without any acquisition costs. However, there are drawbacks and there are hidden maintenance costs. For those who are interested in having software that works for them and not the other way around, it is advisable to get a paid security solution that covers all the relevant attack vectors and offers a decent quality of service.

The thing to remember from this article is:

There is no such thing as FREE. You always pay something(addons, extras) or with something(data about you is also valuable) in some way.

Make sure that you are aware of what you pay and set up some limits.

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