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Free Lunch!

August 17, 2009

cc photo by Sakurako Kitsa
The old saying, there's no such thing as a free lunch is a bit of wisdom we don't question in the real world. We look askance at anything that seems too good to be true. A piece of mail promising a free cruise and week long holiday goes in the trash as quickly as we can scan the phrase "Free Cruise!". For some reason, though, we all believe that there is not only a free lunch online but a veritable free all-you-can-eat buffet, and more oddly, that we are entitled to it.

The howls of indignation can still be heard echoing around FriendFeed. How dare the founders sell to the company to Facebook. How could they betray their users, community and customers?! Now sidestepping the point of whether it's a betrayal or not, it's the sentiment that users referred to themselves as customers that I found most puzzling. I've looked around in various dictionaries, and invariably the definition of customer is one who purchases goods and services from another.

As a customer, it's easy to understand the arrangement you're agreeing to. In the 'good ole days' there was a simple equation. A company provided a service or product and a customer paid for that service or product. The value equation either balanced out or it didn't. The company had to provide a benefit that was a clear value to the customer. There are only two sides of this exchange and it is easy for the participants to understand the motivations of the other.

A relationship of this kind has the virtuous effect of aligning many of the interests of the company with those of its customers. Quality products, excellent customer service, personal customer relationships, customer trust, are all tools for making customers happy. Customers want to be happy, and companies want to make customers happy. Here we invoke Adam Smith, the invisible hand, the magic of the market and all that stuff, and both parties win. (when it works).

Now it seems to me that we're still expecting this alignment of interests, even though we are not the customers of the services we're using. The monkey wrench we're dealing with now is Free. Everything online must be free. Even things that used to represent value to customers have been stripped of their perceived value once online. News is the best recent example of this effect. This has left most web technology startups in the wilderness with regards to business models.

For some reason, the desire to understand the motivation of the other party offering you free goods and services seems to break down online. We effectively open the mail looking for the free cruise and even dial the toll free number! When asked what the motivation is for the provider, we've all been trained to mumble something about 'eyeballs' and advertising.

cc photo by fd
Free business models change the interests of companies so that they are less aligned with the interests of the users. This is the part that seems to cause confusion, the users of free services are not its customers. When people use free services and products online, they are agreeing to become the very resource or commodity that is being cultivated to be exploited or exchanged. "Lunch" is paid for somehow.

On some level, we are aware that we are setting ourselves up to be exploited. I think this may be why there is so much anxiety regarding how Twitter, Facebook, and the other popular-but-not-yet-profitable companies plan to make money. Once our private data, personal behaviors, personal relationships, and other online presence have been cultivated and sold by these services we may start to wonder "what's in it for them?". When we begin to realize that there is no such thing as free online, just as offline, maybe we'll start to actually become customers again.