It’s often claimed that there’s no such thing as a free lunch, but still – espcially and increasingly in this digital age – we are daily using en masse products and services that we consider to be free. Or at least where we don’t have to part with some of our dearly beloved money in exchange for the right to use those products or services. Some examples from the digital world include social media, like Facebook and Twitter; e-mail services, like Gmail or Hotmail (yes, I know, the consumer version is also called Outlook now, but everyone still refers to it as Hotmail); free antivirus; free search engines, like Bing or of course Google; free return shipments for online orders; free wifi in hotels, bars, etc.
In some of these cases, like the free wifi, the reality is quite straightforward: the cost associated with this for the company offering the service is simply calculated into the price of the products and services (in the case of the hotel it’s definitely included in the price of the room). Which obviously also implies that you better make full use of the ‘free’ product as you ARE actually paying for it! (To make things more complicated: that last statement should be treated as a general rule, with free wifi being an exception to the rule, as it might in the end cost you loads of money, but that’s a different topic – you can read all about it here).
But in a lot of cases, like Facebook, Google or free antivirus, you never seem to have to pay for anything, so the costs to the product provider can’t possibly be calculated into the price. You often hear that you pay with your data and your privacy, which is true to some extent of course, but there is another, bigger scheme being deployed. Those free products and services are offered by companies and companies have to make a profit if they want to survive (not necessarily profit maximalized at the expense of everything else, but that’s another discussion). Like most of us, the people working for those companies really appreciate a money transfer from their employer into their bank account each month. Which means that in the end those companies have to make money by selling something to someone, and since they are not charging you for the use of their products (that often cost a fortune to develop and maintain), it’s actually YOU they are selling: by seducing you and millions of others into using their products, they build up a big user base and/or audience which they can then sell to other companies as a target group for advertising.
*For the marketing savvy in the audience: I know you know already, but I’m always shocked to notice that most people don’t seem to realize this at all.