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Comment by tjr | Hacker News Reader

I will take this opportunity to pose a question I've been wondering for a while.

It seems that there is an increasingly ubiquitous attitude that if a product or service can be delivered free of charge, then it should be delivered free of charge.

Is this really the best road to be walking down? Why or why not?

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From Varian and Shapiro's "Information Rules" (http://www.squeezedbooks.com/book/show/7/information-rules-a...):

> Information commodities trend towards the marginal cost: zero, meaning that selling information commodities is not likely to be successful in the long run.

The important thing is the marginal cost, not the cost of creating the thing in the first place.

I'd highly recommend the book.

If you don't, one of your competitors will.

This is true.

But you don't always want bottom-fishers as customers.

It all comes down to a trade: your app's perceived value versus the user's time/money. You can try to fake-out the trade by making it a free app, but then a) you're just competing for eyeballs, which makes you a media company, and b) any incremental improvement will also be seen as free by the end-user.

It's a lot harder to price up from free to one dollar than to price up from one dollar to ten dollars. And maybe you're the coolest media content provider out there, but I'd rather compete on value rather than on attention span. It's more comfortable for this nerd :)

There is a large segment of the young people who grow up with access to video, games and music for free and who don't really have a lot of money so they feel that it is wrong if these things aren't available to them.

Second the price for a given item (when traded freely in a free market) is generally declining over time and since the marginal price of all most all web offerings are zero (for all practical purposes) it is possible to underbid the competition all the way down to zero, landing it in the same category as the aforementioned music.

And I don't know if that is a good thing or not (though I suspect it isn't, at least for most start ups) but if that doesn't matter if that is the direction we are heading.

Yes, commoditization and "normal profits" of perfect competition. I think it's more your second point: it's not that someone should offer it for free if they can - but that someone will.

Open source is part of this too: e.g. the eeePC has linux and openOffice. MS responded by offering low-end XP and low-end office for $40 on the eeePC. It's heading to $0. Also, WINE runs most windows apps on linux. When money is tight, these non-ideal options become more attractive.

I think this is inevitable in all markets, with the old answer: offer something valuable and unique.

Lower-end products (A "Word Lite", etc.) will be big business for budget-conscious consumers who will never see "OpenOffice - FREE" on a shopping comparison.

I'm an open source guy, but at $20 a pop the Gnumeric guys would be rich. I know I'd buy in.

That's a distribution channel problem if they'd "never see" it.

Gnumeric could just package up and sell via that channel. It would seem weird to them ("huh? you just download it"), but if you're right, it would make a huge difference. Then you've got brand-name issues and packaging and the whole business thing which they aren't interested in, not good at, and MS is brilliant at.

Then call it shareware and never actually ask for money. They'll think that they're getting expensive software for free. If someone tries to enter a fake activation key more than a few times (they'd all be fake, logically), actually make it shareware and charge $49 after thirty days.

I must be misunderstanding something, because I thought that the problem you noted was that they wouldn't see the open source version on a shopping comparison. Wouldn't the same problem apply to shareware?

It depends on what market you are thinking of, ie. where they would see (or not see) the offering. I thought you meant physical retail outlets. What did you have in mind?

Shareware has a price attached. With a price attached (and presumably some sort of marketing) it would show up in these results. Those people who still buy software are already well past worrying about lack of a hard copy, and the rise of iPhone and co. has ensured that this distribution model will become the norm. All of the software I've purchased in the past few years has been without a hard copy.

thanks, now I see a price attached makes a difference; else it's not "shopping", so won't show up in a shopping comparison. Yes, just making it shareware would fix that.

I'd guess they'd want to keep it open source: they could dual license it - but there might be a backlash if buyers find out they could have got it free (ironically...) so perhaps some trivial glossy addition to the shareware version, so there's a sense you're getting something for your money... mail you a USB drive with it installed? (very cool). mail you a printed manual? (old skool) or, maybe include a bunch of glossy templates, by a paid pro graphic artist (I like this, because (a). digital, auto-delivery; (b). not code).

I'm assuming they're not in it for the money so it doesn't matter if they only break even (as long as it's not a hassle to provide); it's just a device to promote adoption (as you say).

The point is you never actually ask for money. Have fine print that it's a donation if they do pay anything, but the program works perfectly with no warnings or anything of the sort, completely free. It's all a clever scheme though, and I didn't mean it in any seriousness.

Now, back to my original comment, people tie prices closely to expectations as well as perceived quality.

It's all based on advertising. Advertising will tank. So the "can" will go away.

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