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Tuesday, August 02, 2005

Free As The Right Strategy

Tom Evslin writes, Three good reasons for giving things away free are
- 1) to build a large network;
- 2) to establish a standard;
- 3) to establish a prospect base.
Once you have a large network or control a standard, you can use it to actually make money. Skype’s founding strategy was to give away the software and services necessary to make free computer-to-computer voice calls. They succeeded in building a network of tens of millions of Skype-equipped users and of creating a huge prospect base for paid service like voice mail and the ability to exchange calls with the traditional phone network. Today, with rumoured offers for purchase, from the founders’ point of view, monetizable value has been created. At the beginning of the first Internet bubble, Yossi Vardi famously sold his ICQ service to AOL for upwards of $300 million. ICQ software and connections for instant messaging were free to their users. Tom also points about how the product that he was associated with – “Glue”was not patented and by not offering free – lost out to Adobe when it came with a free reader. Tom regrets that his big mistake was not making the Viewer free; Adobe did and made the Acrobat viewer available free and that made all the difference. By doing that Tom notes that more importantly, we would have controlled a de facto standard.

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