I received an email the other day from a friend of mine who told me that I came up in a conversation he was having with a client as a Subject Matter Expert on a certain topic. Although they would have loved to work with me, they are a non-profit and are very budget conscious. They are opting to use some interns to do this project. More sympathetic I could not be. Although these interns won’t cost them money, there are other costs involved with having them do this work. That free resource comes with inherent costs in the form of inexperience, unreliability, and potential liability. There is some need for training those with zero experience, additional demands made on employees to double check this work, extra space needed for them to even be there. We’ve all made the mistake of cutting corners on something in business and we’ve all paid the price for it. Live and learn.
In the spirit of Leap Year, I’ll do something I seem to do once every three years. I’ve written a few posts in my life regarding the concept of “free” and it might be time to revisit that concept. Let’s take a look at some very common things in the market that most of us consider commodities, feel entitled to, or think they really shouldn’t cost any money.
Social Media
Oh, they are so great aren’t they? You can find every person you’ve ever met or any product you could ever dream of up on networks like Facebook, Twitter, LinkedIn – and let’s not forget the new kid on the block Google+. I had a very successful real estate agent in New York City ask me for a proposal last year for setting him and his team up on “all the major networks” and putting together a comprehensive strategy on how to use them. When he received the proposal, although it was very detailed, his response was, “this seem like an awful lot of money for you to set me up on websites that are free”. I needed to then go into the explanation of the proposal and convey that there is no such thing as free for a myriad of reasons. There are costs associated with everything you do. There’s global branding and consistency, evaluation of the networks for appropriateness, etc., etc., etc. Needless to say, he still only saw these things as a nice-to-have but really didn’t care to make a significant investment in them. For him, this may be the best decision. He’s doing fine without it after all. FYI, he still has no social presence to speak of and I don’t think it’s hurting him much – but I believe it will considering his client base and how they communicate.
Some of the not so obvious costs associated with these types of online efforts are just as important to observe:
- Going beyond basic– yes, these are free services and yes, there are some production costs to make them look right as mentioned above. If you really want to do them right, there has to be some extra work put into them (such as custom tabs for Facebook pages) in order to differentiate yourself from the hobbyist. Unless you are a programmer, you are using a third party service to power these tabs. Almost all charge a monthly fee. If you want to serve up your media really well, capture email addresses, or display your listings, then you are going to have to pony up the dollars for your “free” page.
- User data – all of these networks do much more than serve up a great environment to connect and potentially monetize your relationships; they collect behavioral data that they can use for targeted advertising or sale to third party partners. It may be anonymous or it may be linked to your contact info to create a persona for these companies to better understand how to market to you.
- Your time – maybe the most valuable of your resources. Facebook can give you a page but you have to come up with solid, engaging content to attract and cultivate your target audience. Let’s not forget you have to be available to engage and respond to people who actually find this content good enough to comment on or, odds are, you won’t keep that audience. This could take hours per week or hours per day. What’s your time worth?
Assessment: If you value your time at more than minimum wage and have even one of these networks that you use, you can’t consider this by any means free.
Google (all of it)
Anyone that reads my posts knows that I am a big fan of Google and many of their services – and it’s not just because they are free. Once you sign up for any Google product you are in the Google world. This results in you having immediate access to almost all of their products; all you have to do is activate them and start using them. It’s really quite a nice little ecosystem they’ve got set up there. Most of you reading this know that Google derives the vast majority of their revenues from ad sales. That’s why you see them in your search results, in your Gmail account, and just about anywhere else they can jam them into your user experience. I’m ok with that. After all, it’s free. Some have an issue with that and those that do are free to leave whenever they like. They should stop complaining though. I personally like the prospect of never seeing an ad for farm equipment when I am using these services and, to be honest, seeing ads for the latest and greatest mobile devices aren’t always annoying to someone like me.
Some costs to you, as a user, that you may not be aware of are things that are being talked about quite a bit on the privacy front:
- User data – with the changes to Google’s privacy policy, they make no bones about it; they ARE creating a user persona for every logged in user and they WILL be using that data in any way they see fit. This will help their already effective targeted ad serving techniques but they will also be able to help third party “partners” (i.e., customers) understand you and serve up their ads on other sites you go to with the use of specialized cookies. Think about that, you can be on Samsung’s website researching which TV is right for you and when you go over to Amazon you see an ad for one of those TVs. Creepy? A little. Effective? Perhaps. Ringing Google’s cash register? You better believe it.
User data is big business and I can’t stress enough how important it will be in the coming years. Social Search is the next step in how we find things on the web because, let’s face it, the Internet is just too crowded to deal with 1M+ results from Google on any given search. Again, I’m ok with all this data collection to enrich my search experience – but then again I don’t spend any time online doing things that I’m embarrassed or ashamed of. 
Assessment: If you are the type of person that needs anonymity while you are using free products like email, video sharing, call routing, and web search, then these services are absolutely not free for you and to get what you need, you will need to pay something extra for it. I have an uncle that refuses to use Gmail for this very reason and opts to use his ISP’s email system instead. (Pssst, Uncle Bill, Verizon will be doing this the first chance they get as well. Don’t kid yourself)
Mobile Apps
Anyone who has a smartphone knows that it’s all about the apps. There are lots of free ones out there and whether they are the mobile versions of your familiar traditional desktop social networks like the ones mentioned above or stand alone services (not linked to anything other than what they are on your phone), they help you take it all with you on the go. The value to you is clear, but what is the value to the developer?
There is the model of free (with ads) vs. premium (no ads) which should be obvious to you how those that give you these great apps make their money. It’s just a matter of calculating the lifetime value of a user and pricing the pro version of the app accordingly. SIDE NOTE: Given Apple’s policy of taking 30% of gross sales off the top, it’s no wonder why many developers give the apps away for free and offer a subscription that you sign up for AFTER download to avoid giving up a third of their business to the distributor – but I digress.
A few things that consumers are not commonly familiar with are that mobile is blowing up and that means the following costs to you as a consumer:
- Geo-location based data – and this data is even BETTER data than they can get from your desktop computer. Not only do they get the what and when but now they can get the where as well. By knowing where you searched for a product, checked into a restaurant, or scanned a QR code on the street, companies can create better personas and it’s even possible to capture your phone number unbeknownst to you. Yes, your mobile phone number. You know that thing that you always answer since it is never out of your sight. That thing that they can text message you on and ensure that you definitely will receive it. Yeah, that one.
Assessment: again, if you are able to put a value on your privacy then you can’t say that these apps are free.
Takeaways
You are probably seeing a trend throughout this post. 
User data is valuable enough for lots of companies to give you something for free in an effort to capture it for use by them and their partners. Clearly, marketing is changing and so are customers. These companies understand it and they want to be the ones that help catch companies up with the times – for a price. Google exited the real estate business last winter when they sunset Google Base but have magically reemerged in the space as a B2B service for real estate professionals. When I asked them about what their business was in real estate now, they gave me some very polished responses as you can see here –––––––>
What does this mean to your business?
You’ve heard it a million times, “There’s no such thing as a free lunch”. And you know what? It’s still true! There are very few, if any, things you are going to get for free in this world except maybe your parents’ love or your prerogative to leave this country whenever you like. Nobody should ever fault you for being in business to make money. If you weren’t, then it would be called a hobby. There are limits to what people will pay for things but, in a perfect world, these things will regulate themselves with sufficient competition and alternatives products/services.
The best defense you can have as someone in the business of doing business is really understanding your worth in the marketplace. Whether you are a real estate agent, graphic designer, restaurateur, or accountant, your time and expertise is valuable to those that you work with/for. Those that try to marginalize what you do are trying a cheap negotiation tactic or simply doesn’t understand the value you are bringing to the table. And hey, there isn’t always going to be a fit. If what you do really isn’t worth it to the person you are speaking to, move on. I will never ever pay for cable, so Time Warner should not concern themselves with me. However, most of America will pay, so they don’t need me.
If you have an interesting story about value and worth I’d love to hear it. Feel free to share below.
-PH
