The myth of freeconomics

July 2, 2010

So-called free Internet based goods and services train customers to expect something for nothing. As this phenomenon spreads, it is important to note that it is based upon a false premise.

400 million and counting. Of all the “free” internet services, Facebook is among the most popular. During any one day, approximately 50% of 400 million active users login and leave data footprints. Meanwhile, Facebook has been collecting users’ behavioral information to sell to marketing companies. This is a bartering relationship – no free goods or services are exchanged. Facebook trades access to its social networking site for users’ behavioral information.

Getting Googled. Beginning with “free” Internet searches, Google has done as much to popularize the “free” myth as any company. And yet, even while distributing “free” goods faster than Santa Claus on Christmas Eve, Google generated 2009 revenue that exceeded $23.5 billion. How was this possible? Each time a user accesses Google to conduct an internet search, the user helps to build the algorithm that generates Google’s Page rankings. These rankings form the digital backbone that supports Google Adwords, through which Google charges an advertiser each time a user clicks on his sponsored link.

Google trades the Internet search with the web visitor in exchange for his work in helping to refine the search algorithm. This is a fair exchange as both parties engage in it willingly, but it is not a free exchange.

What the rest of us can do. As companies like Google and Facebook contribute to the myth of free goods and services, other businesses are left to do some explaining. Customers who have been trained to expect what they wrongly suppose to be free become less willing to pay. “Pay to play” is no longer a given. Like all things, though, recognizing the problem is where the solution begins. Sellers are called upon to work harder at supporting their fees, by detailing the effort that represents their scope of work.

Even during the Internet age, there is no free ride.

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