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July 5, 2009

Free is not a business model, it's a competitive advantage !

Google is free. If you want to search, email, store files and pictures, analyze your web traffic, publish an RSS feed, write a blog or publish a website - Google is the free online option for you.

But somebody pays..and today it is through their mammoth advertising coup with Adsense. 

In fact, when the web history iof this epoch is written there will probably be some pretty large questions over how everyone thought that Adsense could just go on underwriting the entire Web 2.0 business models forever. 

LinkedIn is free for most, but if you want a little extra then it costs you. Fair enough, I pay extra for that. is also free if you are happy with the basics, but if you want something a little more polished and powerful then that will cost extra. Again, no problem with that - I pay that too.

Free is not a business model, and unless you are Wikipedia neither is a model built on donations. Low cost is a business model, if it is backed by volume. 

Exclusively expensive is a business model also, (The China White club in London for example) but thanks to places like Dubai it is a bit crowded in that space for anyone to make money these days.

It is a fascinating time to be working in the consulting arena. Knowledge and information is transforming from something that was once highly valued, to yet another commodity. Just check out what is happening to the news; once considered a scarce and valuable product. 

At the same time the skills and technologies to develop software programs, from on premise to online, has never been more abundant. 

So what is happening here? Can it all really be free?

No, not at all. Google is free for the end users but somebody pays for it. Namely the advertisers. In the process it locks Yahoo! and Bing out of the fierce competition to organize the worlds information. 

LinkedIn has spurred many income streams from jobs, to increased access, through to sponsored ads also. By doing so it remains the only really financially viable networking portal for B2B networking. (We business types like to put our trust in "financially viable") has turned the 30 day demo into a highly-likely-to-convert sales pipeline that others are keen to follow. In doing so it locked itself into the online CRM Industry as the natural leader. A model that others such as or are very VERY keen to follow.

Free may not be a viable business model, but if it is backed by one then it is a very sharp competitive edge. 

If an organization like (say) LinkedIn can continue to offer something scarce and of value, like networking between the worlds B2B decision makers, then the free element of that will continue to create gravity for the funded part. The part that people like me and many recruiters will pay for.

How can you turn "free" into a competitive advantage for you and your company?

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