How “free” is free: 5 Myths about the value of free things

| Articles | August 31, 2010

There are many voices out there arguing that free is the future, just as there are many saying there is no such thing as free.

But where does this free-mania come from? Offering things for free can be a part of the marketing strategy (or even a business model) and the reasons can vary:
Media coverage: companies selling electronics, cosmetics, phones could send a free sample of a newly launched product in exchange for reviews.
Lead generation: when offering a free ebook, a free webinar or a free report, a company will most likely require your contact details so they can send you other special offers, hoping to turn you into a customer.
Advertising business model: websites, newspapers, televisions may offer free content to attract readers/viewers, charging companies for advertising on their platforms.
Freemium business model: this is a model used especially by software applications companies, which may offer limited versions of their products for free, while charging for premium versions.

However, I feel the “free” model is being overused these days, all this because of a few myths we consider true. Let’s dig a little deeper into them:

The “New Economy” Myth: In the digital economy, due to lower entry barriers, “everyone can play”, as Seth Godin notes. Basically, you have to be free to fit in.

However, being on the market is not the same as staying on the market and being a player is not the same as being a winner. If your business can’t make enough money, you’re out of the game just as quickly as you were in. Easy access guarantees nothing except just that: easy access. And unless we will be getting back to stone age barter system, we still need money to live and to grow our businesses.

The “Attention” Myth: With new competitors entering the market every day, giving away free products is a good away of getting attention.

I beg to differ. Just look at how many emails you have in your inbox with attention-grabbing titles such as “Free traffic”, “Free subscription”, “Free business advice NOW”. Any of them got your attention? No? But it’s free stuff!! Well, since everybody is trying to get your attention, they are all just generating noise. And since most of these messages turn out to be plain spam or, at best, falsely advertised offers, you ignore them. Unless your job is to run after free stuff all day long, you will put a higher value on your time spent reading those offers than on the products you might receive.

The “Viral Effect” Myth: “Give a product away, and it can go viral”, says Chris Anderson in his book “Free: The Future of a Radical Price”.

Far be it from me to burst anyone’s bubble, but the viral effect is not something you can get by offering a free pair of socks or an ebook. To go from zero to millions overnight is like working on a piece of software in your dad’s garage and expect to turn it into the next Google. The viral effect is a “black swan“, an unpredictable and nonrecurring event, and not something you can base your business strategy on.

And even if you do go viral once, how long can the effects last? How many of you still remember the funny YouTube video you saw last week or the witty article someone sent you by email? And to go even further, do you remember who the author was and how much you bought from him? Exactly. Visibility does not equal sales.

The “Cost Effective” Myth: Free is a cheap way of marketing yourself.

It might be true if your time is worth nothing. Producing content for free, for instance, still costs time, not to mention electricity, web hosting, internet connection and investments in education.

The “Traction” Myth: Giving away free products attracts more users, which you can turn into clients.

Either that, or you have just attracted a lot of people fishing for free samples, people who will never pay a single cent for what you have to offer. In the freemium business model, around 2% of the free users are converted to paying users. With this conversion rate in mind, what are your costs for getting one free user and for getting one paying customer? In some cases, it’s worth it, in others, it’s not.

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