Why are free products bad?
Yes, I know. You’re getting an amazing deal. A great product without having to pay. But you need to stop and think how the company can afford to offer this product for free.
Do they offer a premium plan?
In this case, the premium plan covers your free plan’s expenses. The company is hoping that you’ll receive so much value from the product that you’ll upgrade to take advantage of the premium features. These are okay free products to use.
The free products that you need to beware of are the ones that offer a free product with no premium solution. Let’s do the same thought experiment as we did above. How is the company paying for the free plan? They are not making money directly off the product through customer sales.
There are several options for revenue:
The most popular is advertising. Facebook, Google Search, Twitter, and Instagram are excellent examples. You use their product for free and they collect information from your usage to share with their advertisers. This might not be a big deal to you. You receive value from the product and sometimes you receive an advertisement for another product that improves your life. It’s kind of a win-win for you. This is the ulitmate goal for these companies. They attempt to balance the customer (user) and the advertiser.
The only cavaet is whom do they value more. Do they value the advertiser that pays them or the customer (user) that makes them money? Without either they fail.
I use all four mentioned above.
The other free product is rather scammy.
This is a terrible way to do business. It happens in
South Park - Did you read the user agreement?
Freemium products
What is freemium?
Many use the freemium plan as a way to establish a routine in your workflow and daily life. It’s harder to create an excuse to not try a free product.
Your free plan is paid for by accounts that are on the paying plans.
Examples - Dropbox and Evernote
Free forever products
However, there are free forever products. These are the products you need to be cautious of.
Examples - Facebook, ____
Think about it. How is that company paying their employees to improve upon the product? How do they grow the product?
There are several ways to go about making money.
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Advertisements - These can be annoying. Sometimes they are useful and lead to a new product.
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You will see these advertisements while in the product. You know that you have the option to ignore them.
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Animize your data and sell it off to marketers and research facilities.
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This is the part you don’t see. The information aggregated by this method is not seen in the product.
Freemium is never 100% free. It may be free for you if another company is paying for the same service. It may cost you something other than cash, these are the ones to be wary of. They overstep frequently.