What does the word “free” actually mean and what are the benefits for companies and users?

In today’s business world, especially those that now operate in an online digital environment, the word “free” can have multiple definitions depending on the context in which it is used. If something is free, it usually means there is no financial cost to the consumer. However, these days this is only half the truth.

Over the past decade, freemium model has become the dominant model for many growing businesses, although it often appears that advertising is becoming ubiquitous across the range of services now available to us. With that in mind, let’s take a closer look at what it means to be “free” today. Why do companies choose modern payment models over traditional counterparts and, importantly, how does this benefit the consumer?

What does “free” mean?

Depending on the product or service you use, one of the following definitions of the word “free” may be used:

Completely free – As the name suggests, these products require no financial outlay at all, no hidden fees in the terms or requirements to pay for additional features. Most open source software available for download on your computer does not require payment at all. Well-known examples are the Linux operating software, free casino games available on Canadian online platforms as well as web browsers such as Google Chrome.

Freemium – this model offers consumers a free basic version of a product or service with a full premium package available for an additional fee. This concept works because the free version often provides a decent product, leaving the choice in the hands of the customer whether they want to pay for additional features. Many iPhone apps Online services including Dropbox, LinkedIn and UberEATS also use this model.

Supported by advertising – in this case, the product or service offered is free to users with the caveat that advertising funds everything that is offered. While this gives consumers the ability to use all available features, they must accept advertising and frequently provide data that will help companies target their advertising more effectively. Social networks such as Facebook and X are great examples of advertising-supported products. Some companies also offer an ad-free version of their product for an additional cost, incorporating aspects of the freemium model.

Free game for two (F2P) – an extremely popular model in the gaming industry. The free-2-play model is similar to freemium products, offering consumers the opportunity to download their games for free. Companies monetize these games through additional in-game microtransactions, which often enhance the player experience. Many of today’s most popular games, such as League of Legends and Fortnite, now use this model.

Limited Time Trials – Typically used by growing companies trying to attract new customers, time-limited trials are another popular “free” model used by companies. After the free trial period ends, customers will have to pay a service fee, usually in the form of a monthly subscription. Streaming services such as Disney+, Netflix and Amazon Prime use this model in the hope that viewers will continue to use their services for a fee.

For companies…

So why don’t companies simply charge consumers for their services? What are the benefits of using “free” models like the ones discussed above?

Attracting more clients

By offering a free service, companies can attract a significantly larger customer base than if they offered a paid service. Everyone likes something when it’s free, and so companies tap into this consumer mindset by offering their product without upfront costs. As customer engagement increases, so does brand awareness, becoming a virtuous cycle for businesses.

Income generation

Despite the “free” concept, many of the models discussed here result in impressive revenues for participating companies. For example, the F2P model in the gaming industry has proven its effectiveness. more profitable than traditional prepayment methodswith several leading franchises now moving to a “free-to-play” model in search of higher revenues.

Chance to sell more

Offering free services to customers provides a great opportunity to sell additional features available in their paid services. Consumers often become hooked on a product and begin to see the value in paying for a premium product. Spotify is a great example: many people enjoy the ability to stream their favorite music, but the ability to do so without ads seems to be worth the extra cost.

For users…

It’s not just businesses that benefit from “free” models. There are several ways to improve the customer experience.

No upfront costs

The lack of an upfront financial commitment lowers the barrier to access to new products and services, giving many consumers the opportunity to try things they might not be able to do if there were upfront costs.

Puts choice in the hands of the user

Ultimately, by offering premium services for a fee, the choice remains in the hands of the customer. If they feel the product is worth the extra cost, they may decide to pay a fee to access the full package. If they don’t feel financially able to do so, they can continue with the free model.

Competition from free play models improves quality

The popularity of “free” models has also had an indirect impact on consumers. Due to competition between companies, free services are becoming more common and to encourage customers to use their services, more premium features are becoming available in the free version. This improves the overall quality of the free product without the consumer spending a penny.

It is clear that the meaning of the word “free” is certainly more complex than it seems at first glance. As the way companies operate continues to change, so too will the way they monetize their products and services. In many ways, companies are responding to changing consumer preferences, with many people preferring to be able to decide when to pay for something. Expect the concept of “free” to continue to transform as our world evolves.