Weighing the Value of "Free"

When companies have a "free only" business model—thinking they'll make money later—they're usually betting that "there’s going to be this magic switch they can flip."
  • Transcript


Question: Where do you see free playing into the business model?

Jason Fried:  Free is fine.  So we have some free stuff.  We have free versions of all of our products.  We have a couple of free products.  We gave away one of our books for free.  But, we also charge for stuff.  And we charge for some of the things that we also give away for free.  So you have to be careful not to give away too much.  We like to liken it to emulating drug dealers, basically.  So, drug dealers give people a little taste, they get them hooked and then people buy more.  And, you know, I hope our products are as addictive as crack.  They may not be, but I hope they are.  But the idea is that, that model works really well.  And so our products, you can try them for free.  You can try them as long as you want for free.  And then if you need some more of our products, more features or more capacity, then you can pay for them.  The problem I have is when companies, like their business model is free only, and then they say, "We’ll figure out how to make money later."  As if there’s going to be this magic switch they can flip.  And it gets back to one of these original things I was talking about that if you’re not practicing making money, you’re not going to be able to flip that switch and just know how to do it really well, you need to have some time.  You need to have some experience at making money.  And so, free is like... Ruby on Rails, we open sourced. So that’s free.  That’s a framework that anyone can use to develop products.  And the reason we did that was because we think infrastructure in general should be free.  A lot of the things we base our products, our infrastructure on are free.  You know, my XQL are for database, you know different free servers and Ruby’s an open language that's open.  There’s a lot of open source that we depend on to build our products and we wanted to give back that as well. So, that was really important to us.  And even more so, we knew Rails would get better if hundreds or thousands of people were using it and contributing back to it than if we held it to ourselves and had to make all the improvements on our own because that wasn’t our core competency.  We’re focused on products.  Not our infrastructure.  So by open sourcing our infrastructure, other people can make it better for us and make it better for them.  And I think that’s a really valuable way to do it.

Recorded on July 22, 2010
Interviewed by Peter Hopkins