The Economics of Free – What it means to us
Free! Really?
In one of my earlier blog posts, I talked about when folks found out that Billing Manager was free, a common response was – “what’s the catch?”. Not exactly the wow-moment we’d been hoping for – “wow, it’s free! awesome”. So, instead of just saying Free… we changed our ‘Free’ button to ‘Free – Really?’. And if folks click on that green button we lay it all out on the table, like this -
When you hear that something is FREE, most people’s first reaction is “what’s the catch?”. So let’s put that question to rest right now. Billing Manager is free—you can create online invoices for free, you can track your customers and payments for free, you can use your own logo for free and so on. So how do we make money? There is an optional electronic payment service (QuickBooks Merchant Service) that is fully integrated with Billing Manager. It costs money. It lets you process credit cards in Billing Manager. It also lets your customers pay your invoices online. You don’t have to do this (ever), and you can happily use Billing Manager for free. But our hope is that for some businesses, accepting credit cards and letting their customer pay online will help them get paid faster and more easily. That’s it, that’s the catch.
Going free is (relatively speaking) a whole new game. Many do it by supporting the free product with advertising revenues. That is the classic free model. I’ve just been surfing the web a bit reading other’s thoughts on free and I can appreciate that it can be a source of real concern for some. But advertising revenue models aren’t always what is supporting free economics – in fact, another blogger pointed out many different free models that rely on the business fundamentally shifting their thinking and re-defining what business they are in. One of my favorites was a story about an organization that ultimately wants to give away electric cars for free – and make money by selling the electricity to run the car.
So why were people surprised that Billing Manager is free? My hypothesis is that there are a lot of consumer expectations around free. We expect web email to be free. We expect online banking to be free. We don’t expect tax software, financial management software, or invoicing software to be free. And when it is – the questions loom – how? why? So, by offering something that is counter to the consumer assumption… it takes them a while to digest, and even embrace this new possibility… that it is really free. We have seen that after folks use Billing Manager (and are genuinely delighted with the product) they start to absorb that it’s not only really great, but really free. And then come the big smiles we had hoped for in the beginning.
Let’s talk a little bit about ‘free’ and other Intuit products. There are many groups across the company delivering free offerings. How do we do it? In most cases, we don’t have advertising-based revenue models. Usually the economics rely on some of the users upgrading to add-on services (e.g. payments, payroll) or premium features. There’s a free tax product (with lots of upgrades to premium versions) and free desktop financial management software (with add-ons like payments & payroll, and upgrades to premium versions too). As I mentioned earlier, Intuit Billing Manager is free because we have an integrated payments solution (users can accept credit cards in the product and invoice recipients can pay invoices online) that costs money. We know not everybody will use it – but that’s OK. Our thinking was the more people’s hands we can get on Billing Manager the better… and making it free will certainly remove at least one set of obstacles for potential users.
So tell your friends to put down their wallets and give Billing Manager a try.
Heather
