is free free?

How do you make money and still sell things for free?? Inquiring minds want to know!

I'm fascinated by these business models - one approach is to lower the price and make it up in volume (examples include SouthWest Airlines, Walmart, Costco, etc.). Google zeroed the price altogether by turning the end user into the product and the advertiser into the customer - this was the first real step towards free at scale. Now free is expected, and if you're not ad-funded, it makes it hard to turn a profit... or does it?

Seth Godin wrote about righteous indignation and avalanche opportunities this week, and Krishna asked sure free is for users, but what about publishers? All three blogs apply to business models, how you can optimize your opportunities, create scale (which requires very broad reach), and make money.

While Seth was talking about customer service in the first, I see a different kind of righteousness - "I deserve to get paid, and I'm damned if I let someone take my stuff for free!!" As Krishna argued, it costs money to sell stuff for free; it's easy to understand why people feel indignant about it. Read Seth's second post (avalanche), and you learn that your boss *really* pays attention when you can demonstrate significant reach, outcomes, growth, etc., and you begin to think - the only way for me to break through and get customers to pay attention is to sell it for free.

Do you have to overcome the mentality of expecting to get paid for what you value most? Surely its what the customer values that counts! Not everything has to be for free - people will pay for some things - but what?

If I were an artist you liked and were to offer you my music CD for free, would you begrudge me charging you $4.95 for shipping (even if it only cost $1.25 to ship)??

If I were a chef you liked and offered you appetizers for free provided you bought the main course, would you "buy" (even though you know the main dish prices include the other costs)?

If I were to give you a car for free but charge you $10/gallon for the special fuel it needed, would you "buy" the car (even though you know you'll end up paying for the car in the end)?

Is Free *really* Free?

We all *really* know that deals like this are not truly free, they're just packaging. At the end of the day, any of these organizations needs to earn money in order to pay its employees, cover operating costs, etc. We recognize and respect this because we hopefully do, and want to keep getting paid ourselves.

What about Google? When you happily use their service, you might do so because they're a great company, have a great product and try not to be evil; but have you thought about how economically successful they are? Google employs more than 19,000 employees, earns more than $20 billion/year and achieves more than $4 billion in net profits. These are amazing numbers!

Lots of people had to pay Google cash so that they could be so profitable. These same people had to get paid to be able to afford to pay Google, and you and I (end users) had to have paid them to start this process.

Free isn't free - it's just damned good marketing. Or in Google's case, a brilliant business strategy of turning the customer into the product and selling it to someone else.

Where is the next "avalanche"?? I'm thinking it has something to do with aspects of reCAPTCHA and massively multi-player games. These are both brilliant innovations that are just scratching the surface of new paradigms of commerce.