Is free software profitable in the long run?
Quicken reduced the cost of Quicken Online to free. This is great for consumers, but I have to ask myself why Intuit would make such a move. What does Intuit see that would cause them to move in this direction? Are some of the new online financial applications starting to take root and they see this as a move to fend off competition?
If you are giving your product away free, while incurring costs, how exactly is this great for your business long-term? The only thing I can think of, is that you use the consumer base as a breeding ground for future business or complementary product sales. This strategy seems risky to say the least. Consumers will move to free online applications over paid applications, and will then move amongst the various free applications at will. I do not believe in consumer online loyalty in the software space, as everything is just a click away.
Companies that move in this direction may be protecting their brand and customer base, but if the customer base does not generate revenue, are they really worth having? The idea of “making it up in volume” or “ad revenue” is a design for slowly going broke. Intuit is no Google in regards to PPC revenue sources.
“Online financial organization have just grown more robust as Mint.com and offline incumbent Quicken both introduced new features to their web-based products. Since Mint.com and Quicken Online have similar purposes and functionality in mind, we thought it was time to take a comparative look at how a company from the new social media realm stacks up against a desktop software giant when it comes to online money management.“
Both retail and business consumers are expecting more for less, and sooner or later this will bring the downfall of many smaller companies.
I have been a huge fan of VMWare. This company sold its Virtual Server software (called GSX at the time) for over a thousand dollars per license. Microsoft reduced its product to free, and VMware had to respond in kind. Now they have moved the ante up again with VMWare giving away one of their enterprise solutions.
I do not know if the model of giving software away free and making it up in service or complementary sales will survive. I feel this trend is terrible for the long-term health of the software industry. We may end up with Microsoft and a few other huge corporations, as the small developers will be priced out of existence. Venture capital will only last for so long before the small companies will have to find a way to make a profit or discontinue operations.