To Go Free or Not to Go Free: The Perils of Using Freeware in Your Business

For cash-strapped small business owners looking to keep their operating costs down, free software programs and services like Openoffice, TurboCash, and PlanetSoho can be a real Godsend. And, let’s be honest; who doesn’t like a good freebie? But, there are some inherent dangers to relying solely on free platforms and services to run your business.

The Case of Google Reader: Now You See it; Now You Don’t

The launch of a new product or service by Google is usually met with enthusiasm by the tech community. But when Google launched Keepn, a note-taking service that competes with Evernote, it received strong criticism. This feedback was not about Keep itself, but Google’s attitude towards its products — more specifically, their decision to arbitrarily shut down Reader, its RSS aggregator.

Unlike Buzz or Wave, which never really clicked with users, Reader was a popular service. While it was true that usage had been falling over the years, it still sent more traffic to websites than Google+, and for some, it rivaled social media platforms, such as Twitter for referral traffic.

After the launch of Keep, Om Malik wrote that Keep could well be a better app than Evernote, but, “It is hard to trust Google to keep an app alive. What if I spend months using the app, and then Google decides it doesn’t meet some arbitrary objective? Evernote has my data and frankly, I’m glad to pay them to keep it because they are who they are.”

In The Washington Post, Ezra Klein took the argument to the extreme, writing that he now feared using even Gmail. Klein is frustrated with Google’s restriction of not allowing him to buy more than 30GB space for his email account. “It was a reminder that Google’s core business isn’t running an e-mail system or selling data storage. The thing I wanted to pay them to do wasn’t something they make much money off.”

The Cost of Free

Google isn’t the only company to leave its users in the lurch. Another well-known example is the recent shutting down of Posterous after the company was acquired by Twitter. Though Posterous did technically provide its users a way to export their feeds and preserve their links, the time and effort spent creating an identity – which is, after all, what a blog is for — was all but wasted.

The larger lesson that we can learn from the Reader, Posterous and many such closures is that free doesn’t mean forever. If you choose to go with a free product or service to support some of your business functions, then you’d do well to ask yourself why this company is offering its service for free. More specifically, what is its business model?

Take Evernote: it offers its basic services for free, but charges for a more premium service. There’s a business model here, which ensures that the developer is committed to his/her customers.

Then there are services like WordPress. The service is free, but also open source. Which means that even if Automattic (the company that offers free hosting) stops its support, the service will survive. Not only that, Automattic offers a premium version of WordPress for a price, as well as a bunch of add-on services for which it charges money. Now that’s what I call a double guarantee — open source + sustainable business model.

Apart from such business models, there are two reasons why a particular app or service is free:

1) You are part of the product: Meaning that the developer will showcase the number of users and make money via advertising. Facebook, Twitter, free versions of popular games like Angry Birds which are ad-supported are prime examples of this model.

2) They’re looking for a buyout: Nothing shows a developer’s talent better than a service that works. In this case, the developers are looking for a way to be acquired by giants like Google or Facebook for the ultimate one-time payment. Posterous, Picnik, and Snapseed are services that shut down soon after being acquired.

In both cases, the developers don’t share a direct relationship with their consumers the way they would if it were a paid app or service. In an article on The Verge, David Chartier of AgileBits, which sells its app 1Password for $17.99 on App Store, says, “When the transaction is between you and the people who made the thing you want, there is a great relationship — a responsibility — that you don’t get any other way.”

That said, for many small businesses, it may not be feasible to pay for every app and service out there. The simple way to decide whether or not to go with a free option is to get a feel for the platform’s raison d’être and to then assess what would happen if the developers decided to suddenly pull the plug. If you are a serious blogger, for instance, you may want to spend money and host your own blog on a server. The casual blogger, on the other hand, may not be as affected as dramatically by the closure of a blogging platform.

Where do you stand on the free vs paid debate?