No such thing as a free lunch

Written by

Christopher S Penn

Marketing

Warning: this content is older than 365 days. It may be out of date and no longer relevant.

BLT No such thing as a free lunch

How much did you pay last year for Facebook? For Gmail? For Foursquare? For Twitter?

Right.

Nothing.

How much value did you derive from these services?

If you don’t know or can’t tell, the easiest way is to ask yourself how much you would have to spend out of pocket to recreate them. Take something like Gmail, as an example. You’d need a computer with an Internet connection, the Linux operating system, the Postfix mail server, the Apache web server, knowledge of how to securely configure all these pieces, and the web interface.

You’d need to administer this server, applying software updates and security patches on a frequent basis. It’s not an impossible task – I did it for years as an IT administrator – but it is not a simple thing to do, and it is not an inexpensive thing to do.

How much would it cost you to develop your own Facebook, where you could set your own privacy terms, run the service exactly the way you wanted it to, be everything that you wanted it to be?

Services like Twitter, Facebook, and Gmail are not free. They have never been free. Up until now, the costs to you have merely been deferred. They have real costs that are traded in exchange for something of value from you. In this day and age, that’s personal and behavioral data. Your goodwill? Your word of mouth? Both combined with $5 will get you a cup of coffee from the local commercial coffee chain. What’s for sale is you, the consumer, to advertisers and partners.

If you don’t like how these businesses – and they are businesses, seeking to make profits – treat you, don’t use them. Don’t sign up for them. Don’t give them your time, data, or mindshare. Build your own or use businesses that are more aligned with your values – and be prepared to pay cash out of pocket for them.

There is no such thing as a free lunch.

Did you enjoy this blog post? If so, please subscribe right now!

Get this and other great articles from the source at www.ChristopherSPenn.com! Want to take your conference or event to the next level? Book me to speak and get the same quality information on stage as you do on this blog.

Marketing Social media

Comments

26 responses to “No such thing as a free lunch”

May 27, 2010

Debbie Ferm

Oh, this is so, so true! I've been trying to teach my kids about “free”, and it's a hard concept for them to understand. I remember the econ class where I first really got it and I've never thought about things the same way since.

Reply
May 27, 2010

Debbie Ferm

Oh, this is so, so true! I've been trying to teach my kids about “free”, and it's a hard concept for them to understand. I remember the econ class where I first really got it and I've never thought about things the same way since.

Reply
May 27, 2010

Matt Ridings – Techguerilla

I have mixed feelings on this. On the one hand, you're absolutely right and I 100% agree with the notion that these are businesses out to make a profit.

But I think were it goes astray is that given the current broohaha over Facebook I have to assume that all of that crowing is what precipitated this article. And when combined with that information it basically leaves your premise being “if you didn't pay anything, you cannot trust an organization to uphold the values it presents to you, nor should you be upset when it doesn't”. The problem isn't are you trading personal data in exchange for hard dollars, of course you are. The problem is whether you still have control over *what* data is being traded. If you want to look at this as only logic vs. ethics, values, emotions, etc. then the equation looks something like:

Initial Data/Controls Agreed Upon By Consumer = x Value To Provider. That is presumably determined to be valuable enough to both parties to be an equal exchange. No problems so far.

Provider changes the initial agreed upon terms midstream, but does so quietly and makes it more difficult for Consumer to override. Consumer discovers this. Consumer now angry because the original value proposition has gone out of balance in favor of Provider in a seemingly underhanded way. Seems like a logical response to me. “Free” is a misnomer. You have a real cost, it's just not a monetary one. Each piece of your data you release has a value, you trade upon that value. When more of those pieces are taken than you initially agreed upon, or more importantly, when it's done in such a way that you don't find out until *after* the fact, it feels like a bait and switch to the consumer. And in my opinion that's exactly what it was.

You can argue to *leave* that company that abuses that, but to argue that you can't trust an organization in the first place whose biz model is based upon the trading of your information I have to disagree. It's those businesses that need the *most* trust. My information is not free, and it's not a minor offense for you to take it, expose it, and trade upon it without my permission.

Reply
May 27, 2010

Matt Ridings – Techguerilla

I have mixed feelings on this. On the one hand, you're absolutely right and I 100% agree with the notion that these are businesses out to make a profit.

But I think were it goes astray is that given the current broohaha over Facebook I have to assume that all of that crowing is what precipitated this article. And when combined with that information it basically leaves your premise being “if you didn't pay anything, you cannot trust an organization to uphold the values it presents to you, nor should you be upset when it doesn't”. The problem isn't are you trading personal data in exchange for hard dollars, of course you are. The problem is whether you still have control over *what* data is being traded. If you want to look at this as only logic vs. ethics, values, emotions, etc. then the equation looks something like:

Initial Data/Controls Agreed Upon By Consumer = x Value To Provider. That is presumably determined to be valuable enough to both parties to be an equal exchange. No problems so far.

Provider changes the initial agreed upon terms midstream, but does so quietly and makes it more difficult for Consumer to override. Consumer discovers this. Consumer now angry because the original value proposition has gone out of balance in favor of Provider in a seemingly underhanded way. Seems like a logical response to me. “Free” is a misnomer. You have a real cost, it's just not a monetary one. Each piece of your data you release has a value, you trade upon that value. When more of those pieces are taken than you initially agreed upon, or more importantly, when it's done in such a way that you don't find out until *after* the fact, it feels like a bait and switch to the consumer. And in my opinion that's exactly what it was.

You can argue to *leave* that company that abuses that, but to argue that you can't trust an organization in the first place whose biz model is based upon the trading of your information I have to disagree. It's those businesses that need the *most* trust. My information is not free, and it's not a minor offense for you to take it, expose it, and trade upon it without my permission.

Reply
May 27, 2010

Christopher S. Penn

Value changes, absolutely, with these companies. And I think your last point is the important one – if it's of concern, leave. Vote with your feet and dollars, and the companies in question will either need to find a different revenue model or accept that their asset – the audience – is decaying faster than they can monetize it.

Reply
May 27, 2010

Christopher S. Penn

Value changes, absolutely, with these companies. And I think your last point is the important one – if it's of concern, leave. Vote with your feet and dollars, and the companies in question will either need to find a different revenue model or accept that their asset – the audience – is decaying faster than they can monetize it.

Reply
May 27, 2010

Chel Wolverton

Same argument goes for events like Podcamp. I don't get paid to help organize but it still costs me time to organize it. If I didn't love doing so I wouldn't spend the time. Because a lot of folks don't see what putting together the event takes doesn't mean it's magic.

The really interesting and sad part to me is the sense of entitlement that comes with some free events, services and items. Appreciate that you have access to the knowledge, information and services and move on.

Reply
May 27, 2010

Chel Wolverton

Same argument goes for events like Podcamp. I don't get paid to help organize but it still costs me time to organize it. If I didn't love doing so I wouldn't spend the time. Because a lot of folks don't see what putting together the event takes doesn't mean it's magic.

The really interesting and sad part to me is the sense of entitlement that comes with some free events, services and items. Appreciate that you have access to the knowledge, information and services and move on.

Reply
May 27, 2010

Debbie Ferm

Oh, this is so, so true! I've been trying to teach my kids about “free”, and it's a hard concept for them to understand. I remember the econ class where I first really got it and I've never thought about things the same way since.

Reply
May 27, 2010

Matt Ridings – Techguerilla

I have mixed feelings on this. On the one hand, you're absolutely right and I 100% agree with the notion that these are businesses out to make a profit.

But I think were it goes astray is that given the current broohaha over Facebook I have to assume that all of that crowing is what precipitated this article. And when combined with that information it basically leaves your premise being “if you didn't pay anything, you cannot trust an organization to uphold the values it presents to you, nor should you be upset when it doesn't”. The problem isn't are you trading personal data in exchange for hard dollars, of course you are. The problem is whether you still have control over *what* data is being traded. If you want to look at this as only logic vs. ethics, values, emotions, etc. then the equation looks something like:

Initial Data/Controls Agreed Upon By Consumer = x Value To Provider. That is presumably determined to be valuable enough to both parties to be an equal exchange. No problems so far.

Provider changes the initial agreed upon terms midstream, but does so quietly and makes it more difficult for Consumer to override. Consumer discovers this. Consumer now angry because the original value proposition has gone out of balance in favor of Provider in a seemingly underhanded way. Seems like a logical response to me. “Free” is a misnomer. You have a real cost, it's just not a monetary one. Each piece of your data you release has a value, you trade upon that value. When more of those pieces are taken than you initially agreed upon, or more importantly, when it's done in such a way that you don't find out until *after* the fact, it feels like a bait and switch to the consumer. And in my opinion that's exactly what it was.

You can argue to *leave* that company that abuses that, but to argue that you can't trust an organization in the first place whose biz model is based upon the trading of your information I have to disagree. It's those businesses that need the *most* trust. My information is not free, and it's not a minor offense for you to take it, expose it, and trade upon it without my permission.

Reply
May 27, 2010

Christopher S. Penn

Value changes, absolutely, with these companies. And I think your last point is the important one – if it's of concern, leave. Vote with your feet and dollars, and the companies in question will either need to find a different revenue model or accept that their asset – the audience – is decaying faster than they can monetize it.

Reply
May 27, 2010

Chel Wolverton

Same argument goes for events like Podcamp. I don't get paid to help organize but it still costs me time to organize it. If I didn't love doing so I wouldn't spend the time. Because a lot of folks don't see what putting together the event takes doesn't mean it's magic.

The really interesting and sad part to me is the sense of entitlement that comes with some free events, services and items. Appreciate that you have access to the knowledge, information and services and move on.

Reply
May 28, 2010

Mick Morris

Hey Chris, this is an interesting way of looking at the value chain of social media. You are absolutely right there is no such thing as a fee lunch.

However, there needs to a close examination of the more contractual nature of the exchange. This does not just apply to facebook etc…. when we agree to terms of service at the commencement of a relationship to have one party unilaterally change the conditions of that contract (as has facebook, as do telco's, as do banks etc etc etc) is fundamentally unfair, regardless of the fact that they are a business and are seeking to make a profit.

If they are going to reserve the right to unilaterally change conditions then the onus should be on that business to provide detailed analysis of the changes and how they could possibly affect the consumer to EVERY customer well in advance of the change. Thus providing the consumer with adequate time to decide if they wish to buy in to the change or make some other decision about their participation.

The fact that there is no such thing as a free lunch should cut in both directions!

Reply
May 28, 2010

jlbraaten

This is a great reminder that while we don't always like the changes coming out of our favorite services, we're using them at no direct cost to us. Really, we don't have room to complain because there's always a choice.

Reply
May 28, 2010

jlbraaten

This is a great reminder that while we don't always like the changes coming out of our favorite services, we're using them at no direct cost to us. Really, we don't have room to complain because there's always a choice.

Reply
May 28, 2010

tschnick

Well said sir.

Reply
May 28, 2010

tschnick

Well said sir.

Reply
May 28, 2010

Mick Morris

Hey Chris, this is an interesting way of looking at the value chain of social media. You are absolutely right there is no such thing as a fee lunch.

However, there needs to a close examination of the more contractual nature of the exchange. This does not just apply to facebook etc…. when we agree to terms of service at the commencement of a relationship to have one party unilaterally change the conditions of that contract (as has facebook, as do telco's, as do banks etc etc etc) is fundamentally unfair, regardless of the fact that they are a business and are seeking to make a profit.

If they are going to reserve the right to unilaterally change conditions then the onus should be on that business to provide detailed analysis of the changes and how they could possibly affect the consumer to EVERY customer well in advance of the change. Thus providing the consumer with adequate time to decide if they wish to buy in to the change or make some other decision about their participation.

The fact that there is no such thing as a free lunch should cut in both directions!

Reply
May 28, 2010

jlbraaten

This is a great reminder that while we don't always like the changes coming out of our favorite services, we're using them at no direct cost to us. Really, we don't have room to complain because there's always a choice.

Reply
May 28, 2010

tschnick

Well said sir.

Reply
May 30, 2010

Sean

I like your analogy to how complicated setting up your own gmail would be.
People who think companies provide these services “free” out of the goodness of their own hearts are just being naive.

Reply
May 30, 2010

Sean

I like your analogy to how complicated setting up your own gmail would be.
People who think companies provide these services “free” out of the goodness of their own hearts are just being naive.

Reply
May 31, 2010

Sean

I like your analogy to how complicated setting up your own gmail would be.
People who think companies provide these services “free” out of the goodness of their own hearts are just being naive.

Reply
May 31, 2010

bogace

Well, you are right, for someone with enough technical knowledge, it's not hard to build your own mail system, or social network etc, if you are so careful on your privacy. Well, and about all those services you mentioned, yes, they are never free, because our data, time spent on them, they are all a values, and they can be bought and sold, also statistics…

Reply
May 31, 2010

bogace

Well, you are right, for someone with enough technical knowledge, it's not hard to build your own mail system, or social network etc, if you are so careful on your privacy. Well, and about all those services you mentioned, yes, they are never free, because our data, time spent on them, they are all a values, and they can be bought and sold, also statistics…

Reply
May 31, 2010

bogace

Well, you are right, for someone with enough technical knowledge, it's not hard to build your own mail system, or social network etc, if you are so careful on your privacy. Well, and about all those services you mentioned, yes, they are never free, because our data, time spent on them, they are all a values, and they can be bought and sold, also statistics…

Reply