Have you ever tried a product where you have thought “They couldn’t give it away if it was free”. Though it has been commonly associated with products of a substandard quality, we are starting to see that in any given product category companies are competing with newcomers who offer a similar even superior product for free.

However unless you work for a government agency or a university, you can’t just create or sustain an initiative just on an whim of an ideal.

Businesses do not give away their products for free, there are bills to pay, mouths to feed and accountability to shareholders. The evolution of *free does not throw the pursuit of revenue out the window, it merely is shift in where the revenue comes from.

Free is not a radical new business model but a tried and true marketing strategy that has been pivotal in the adoption of iconic brands for over a century.

Companies package free into every single product we buy. Banks, governments, retailers, television shopping channels and manufacturers have all been using free as a marketing strategy long before the seemingly insane Google bundled unlimited video, email and office applications away for free.

RBC recently gave away a free netbook with a new account, governments give subsidies to farmers, retailers offer complimentary gift wrap, tv shopping channels bundle away deals till exhaustion and manufacturers sell electronics at close to cost.

The reason is that banks make their money back ten fold on rates and loans, governments on tax revenues, retailers on the gifts themselves, TV shopping channels on the shipping and electronics retailers on the accessories and set up.

Google has been criticized for seemingly bizarre investments in Google Voice, Google 411, Gmail, and most recently Youtube. Youtube which they paid $1.6 billion amount for and supposedly loses them 415 million a year despite being one of the top 10 visited websites in the world.

So how does Google sustain this?

Well they happen to be quite good at what they do, to the tune of 22 billion dollars last year. You see Google has a very simple business model.

People use the internet and they sell advertising on internet. The more people use the internet the more advertising Google to sell.

So if their goal is to maximise their advertising revenue, they need people to use the internet more. If someone uses Gmail instead of outlook, Google Docs instead of Office and Youtube instead of America’s Funniest Home videos – Google can slap more advertising on it. For Google, if investment leads to more business we call it marketing.

So how does this apply in the REAL world?

Would a conveince store charge you a dollar for a plastic bag to carry a two dollar carton of milk? Sure they could make a great margin up selling the plastic bags but it would reduce the volume of customers buying groceries from their store.

Is a buying music with a t-shirt (as rapper Mos Def most recently tried) any more ridiculous than buying it with a plastic disc?

The question you have to ask is are you selling milk or the plastic bag?

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