Free Stuff Costs Us Too Much

How valuable is free stuff? What's your first reaction when you hear that somebody got something for free? How much free stuff do you have sitting around unused, and how do you feel about that compared to stuff you've purchased that you haven't used? What are you producing that you're giving away for free, and what’s the value of the free stuff?

A lot of questions, I know, but if you sit with them and take them seriously, you'll probably notice a lot of inconsistencies in your thinking. The truth of the matter is that understanding "free" isn't easy as we'd like to think. I wish I were smart enough to come up with this post on my own, but the reality is that it's a synthesis of a few different conversations and observations. The main point is that we need to rethink our notions of “free,” especially as it relates to free information, and doing so could benefit us all.

Free...With A Catch

The first conversation is from the SXSW keynote with Chris Andersen and Guy Kawasaki. The salient point that I want to bring out here is the contrast Chris made between 20th Century "free" and 21st Century "free": 20th Century free wasn't really free since there was always a catch. "Buy 1 get 1 free!", "Sign up (and give us your information) and get something free!," etc. We learned that if something were free, it either was worth what we paid for it or that it was used to get something else from us. In fairness, that free model was necessitated by the fact that it costed something to make something. But that economic model has changed. We can now offer information and services for costs so low that they're effectively zero. When the cost to offer and deliver something valuable is effectively zero, there's no reason why we have to charge, which means there's no necessary connection between something being freely given away and the value of what's given away. In other words, 21st Century “free” can really mean free. Unfortunately, we don't get how something can be free and valuable because we're still stuck thinking in terms of 20th Century "free."

YAY For Free! Can I Please Have Some Food Now?

The second conversation: Nick Cernis' post on the End of Free Content. Nick's known to do awesome things, and rather than change the way we think about paper, he's instead changing the way we think about economic exchange. The problem with free is that so many content producers (read: creative entrepreneurs) are trying to build a business by giving away their creative stuff. If you leave a brick-and-mortar store with some of their stuff without paying for it, it's called stealing; if you leave a bloggers' website with some of their stuff, it's called many things, but stealing isn't one of them. We expect to pay for stuff from stores; we don't expect to pay for stuff from (most) websites. Nick's point is that the traditional way around this is to try to earn income from selling people stuff related to but distinct from the content being presented. There are a ton of different ways to do this, but most of them are predicated on giving away the content in order to sell something else. This makes about as much sense as Burger King giving you whoppers so that you'll buy McDonald's fries, in return for McDonald’s selling Burger King’s fries, and it's equally as lopsided. Content producers recognize the problem at some stage or the other, but the problem is that they're trying to win a game of profit by playing under the rules of free. At a certain point, content producers have to sell their content, but the common path is to go from free to $47 (or some other number that ends in seven) in no time flat. But why should it go from zero to $47, when it can go from zero to $4 just the same? Remember, there’s very little investment sunk into the creation of the content, so the primary justification for the price increase has to be made from the position of economic viability for the business. Surely, no business could survive charging so little for its valuable products? Except for Apple. And 37Signals. And Peepcode. And Leo. And Jonathan Coulton. And the myriad of membership sites mushrooming up as you read this. Additionally, there's a general rule in pricing a product: the higher the price, the harder you'll have to work to acquire a customer for that item. And therein lies a big hurdle for a lot of the content producers I know - we want to create stuff and make some money from what we do, but the whole selling process is not our particular cup of tea. It's more like the thought of going to a creepy dentist. What’s beautiful about the idea of micropayments is that it's a win-win for everybody. Content producers can make money from their creations, and the fact that they'll be receiving money for said content encourages most honest folks to create content worth paying for. Consumers can get valuable stuff that meets their wants and needs without having to pay what essentially amounts to the inflated cost of products that account for people who are too frugal to pay $47 for something. And we can all skip the traditional overhyped sales/launch process... But wait, there's more...

The Psychology of Exchange-Based Acquisition

The third leg of this post comes from a conversation Havi started about free stuff. She's dealing with the fact that if you give people free stuff, they won't use it, but if you charge them something, even if it's a ridiculously small amount, they'll use it in a heartbeat. As counter-intuitive as this sounds, think about it for second. I bet you're frustrated that you haven't used something you've purchased. It could be a book, an album, exercise equipment, that pair of shoes you know you'll never wear - it doesn't matter. Now contrast that to how you feel about the free stuff you've received; sure, you may recognize its value, but I bet you feel different about the fact that you haven't used the free stuff. It doesn't matter that the free item is "worth" the same amount as the one you've paid for - we weigh the things we've exchanged something we care about for (i.e., money) differently than the things we haven't paid anything for. And because we care about the things we've acquired through exchange, we're more likely to use it and take it seriously, since we a) don't get confused by “free” stuff (see above) and b) are generally more motivated by things we've lost (money) than the things we could potentially gain (i.e., free stuff). I've experienced this so many times through coaching that I know it to be true; if I contacted you out of the blue and said, "Hey, don't check your email in the morning if you're a morning person," you might take me seriously, but if you contacted me and paid me to tell you the same thing, you'll go at the idea like a spider-monkey. You've paid for such wisdom, after all. So, while there’s a lot to be said about providing free stuff to people (karma, goodwill, altruism, etc.), it turns out that if you're creating something that changes people's behavior, the best way to actually get them to change their behavior is to charge them for the item in question. I assure you, you'll get tons less praise for the awesomeness of the free "stuff," but the people who buy your stuff will be more likely to take your stuff and do something with it rather than just add it to the pile of free stuff that's already gathering dust (physical, mental, or digital).

Pulling It All Together

Let's do some synthesis here. The word 'free' confuses us because we equate the cost of the item (to us) with the value of the item (to us). Content producers need to charge for some of their content so that they can put food on the table. Consumers benefit more when they pay for stuff because they actually use the stuff they buy. If content producers used micropayments as a model, less time would be spent on the marketing/promotion/sales process that could instead be spent on creating valuable products, so consumers would have greater access to the stuff they want and need. And maybe - just maybe - we'd somehow move beyond thinking that free stuff isn't valuable and we would actually sit up and pay attention to value rather than cost. The best things in life are free, after all. Edit: Christy (in the comments) reminded me that I didn't cover fully what I was thinking. I'll copy the text here so that it shows up in feed readers: @Christy: I’m glad you brought this up, as it’s the weaker point of the idea that I didn’t bring out. Absolutely, free stuff can and should be a means to an end. I’m also not saying that ALL content needs to be sold, but that content producers should consider producing smaller, more cohesive products that they sell for much less, rather than spending months (!!) building the audience and credibility to sell a larger product.