Free vs. Not Free

Chris Anderson, who literally wrote the book on "free," faces off with the tech gurus at 37Signals, who say "free" is the great sham of the digital age.

InformationWeek Staff, Contributor

October 9, 2009

3 Min Read

Page 2 of 2

Not Free: Nothing Plus Nothing = Nothing
David Heinemeier Hansson and Jason Fried of 37Signals say ‘free’ thinking will never amount to real business

If you want to get Jason Fried riled, all you have to do is bring up the subject of giving your products away. Fried, the co-head of hot Web application company 37signals, and his partner, David Heinemeier Hansson, detest free, a concept they see as little more than a sham, a sleight-of-hand that covers up the lack of a real product. If you want to make money, they say, you need a real product that customers will spend money on, a business basic that free Web space has distorted.

“You pay for everything in your life except some of the stuff on the Internet,” Fried says. “That’s the built-in human behavior we’d like to mimic. The problem with this free thing is, if you’re going to hook people on free for four years, and all of a sudden start charging for things, that doesn’t work very well.”

"Free is bull____. What's so good about free? I don't get that. Having 4 million users use your free thing doesn't really mean anything. If you charged $1, you'd probably lose almost all of them, so it any good at all?" - Jason Fried

Entrepreneurs are getting the wrong message from the Klondike buyout of YouTube and the “ridiculous” valuation of Facebook, they say, pointing out both companies are still hemorrhaging cash and haven’t figured out a way to make money. Free is a bubble that will burst when investors run out of patience.

“I’ve been talking to startups, and people have this notion that all they need is eyeballs, all they need is a lot of users and then something magical will happen, and then they’re going to be a huge success,” says Heinemeier Hansson. “That’s going to lead to a lot of unavoidable failures.”

Fried, 35, and Heinemeier Hansson, 29, revel in exposing what they see as the entrepreneurial fables in the era of social media Kool-Aid. They’ve won a wide following for their ventings on their Signal vs. Noise blog, citing 100,000 daily visitors, and in a book about building software, Getting Real. Their themes -- don’t risk it all, stay small, charge for value, free is stupid -- fly in the face of the conventional image that Web success comes from big startups that attract massive amounts of free users and then massive buyouts -- yet they’re right in line with a time-honored business practice: making a profit.

“The answer,” Fried says, “is to be fair on prices, deliver great services that your competitor can’t and simply outlast free.”

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