I just read this very informative article, I highly encourage those in the business of software to read. Perhaps the most interesting evidence that this works is the real world scenario summarized at the end of the article, where giving away the intellectual property did not cannibalize sales of the product, but instead help market if by creating buzz.
So what about free copies? How do you compete with free, to state the battle cry of the new Luddites who fear digital technology? It’s done all the time. One of the most dramatic recent instances of this was the strategy of science fiction writer Cory Doctorow who, over the course of three years, gave away 700,000 electronic copies of Down and Out in the Magic Kingdom. Sales of the hard copy went through six printings and surpassed his publisher’s expectations. Many of the downloaders, Doctorow said, did not buy the hard copy and probably would not have regardless, but the giveaway created considerable buzz and a significant minority did buy the hard copy.
I see so many forms of “piracy” today that aims to achieve the same thing, albeit through legitimate channels so it can’t be called piracy and doesn’t strike people as piracy. Many SaaS Web 2.0 companies offer a “free” version of their product, usually limited by a time period or crippled (missing a cool feature, etc.) with the goal of converting those prospects into paying subscribers. Paying customers are usually given access to an uncrippled version of the product with full fledged functionality and so forth.
Hmm .. giving away the product for free to entice people to pay for a better version .. giving away the product to create buzz .. hmm .. yeah. Sort of kind of like what the end result of piracy is. But legit.
This has got me to thinking about some of the open-source a.k.a. free software business models. Wow, what a disruptor. In certain respects, almost a form of legalized piracy, isn’t it? Not all, but some open-source software are basically knock-offs of a must-pay commercial software.
Knock-offs are pirated products. Because they are usually cheaper than the original, knock-offs tend to appeal to a more price-conscious segment of the market; that is, the buyers of pirated products are probably not legitimate prospects for the innovative new product, either because they cannot afford, or do not want to pay, the higher price. Message to the innovative marketer? Either drop the price of the new product or produce a cheaper version — or be the first to exploit a new technology.
Note: I am a proponent of the open-source software movement, I am not in anyway bashing the community–but in fact, applaud them for many of the successful technologies they have introduced, resulting in where we are today.
Update 6/3/2007: Salon has a piece comparing the success of AK-47’s and the QWERTY keyboard. Also mentions software piracy.
Despite all the whining that proprietary software companies do about “piracy,” the industry has long been aware that it’s not always such a bad thing to have everyone illicitly copying your products. Get everybody hooked, and then start selling the upgrades, or support services, or other nifty add-ons. For open-source software companies, the strategy is a fundamental plank of the basic business model.
