Blogger Hank Williams has an interesting post in his excellently titled blog “Why Does Everything Suck” detailing the challenges that “free” presents to many of the Internet and software-based business models that have prevailed for the prior 30 years. William’s thesis is that there are not enough ad dollars to support free models and equates Google’s “dumping” of free programs (think Gmail and Google Apps) into the world as tantamount to unfair trade practices in the manufacturing economy. He raised similar concerns in a prior blog on the topic:
“With less “free” floating around, a more regular supply and demand dynamic can take hold, customers will have to pay for the things that are important to them and non-quantized growth dynamics can return. In the meantime, why should consumers pay for products and services that VCs and their pension fund investors are willing to give away for free?”
But there are higher laws working here and we are never going back. Why? Because scarcity is inherently opposed to the digital age. Proprietary software companies (think Microsoft, Oracle) got away with it before the Internet became mainstream. But the digital world is now distributed and new laws are taking hold. Scarcity is artificial. Abundance is natural.
That is a good thing for consumers. The question is how can companies adapt. Hank mentions a couple of examples of companies who have successfully employed the free model – 37Signals and SmugMug – but is at a loss to name others. I would add MySQL, Zimbra, Alfresco, WordPress and SugarCRM. Sun is betting its business on this model.
Yes, many old companies will go away and many Web 2.0 companies will dry up (as an aside, I am beginning to think of the definition of Web 2.0 is having “no identified buyer for your product and services”). But that is creative destruction at work. It will be painful, but ultimately, companies who focus on delivering excellent products and services will still be rewarded. And then they can “dump” more free products on to the market.