Weighing the Value of "Free"

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

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

Recorded on July 22, 2010
Interviewed by Peter Hopkins

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."

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