Steve Ballmer Declares 'Free Is Not A Business Model' — Apparently Unfamiliar With Microsoft's Free Products
from the check-'em-out,-steve dept
Josh W points us to an article about Microsoft new mobile phone software that contains an odd quote from Steve Ballmer, responding to a question concerning Microsoft’s plans to compete with Google’s free Android mobile operating system:
“Free is not a business model,” he said. “We are a commercial company, we will look to gain revenue and profit from our activities. You’ll have to ask our competitors if they’ll make money on free things.”
Internet explorer. Bing. Microsoft’s new security software. All free. All offered by Microsoft. Is Steve Ballmer admitting that he doesn’t know about any of these things… or is he just expecting that the reporter and the readers of the article are flat-out stupid? Clearly, Microsoft seems to recognize that free is a part of lots of smart business models, so why is its CEO apparently acting clueless on this front? As clearly anyone who thought this through knows, free by itself is not a business model, but free, in combination with a larger business model often makes a lot of sense. That’s what Google is doing, and it’s what Microsoft is doing as well. So why is Steve Ballmer pretending otherwise?
Filed Under: android, business models, free, steve ballmer
Companies: google, microsoft
Comments on “Steve Ballmer Declares 'Free Is Not A Business Model' — Apparently Unfamiliar With Microsoft's Free Products”
Is it really free?
I think Steve’s idea is that it’s not completely free since you had to buy a Windows license in the first place to get the software. His point is that core components like Windows won’t be free any time soon. It’s like IE or Windows Media Player- it’s another reason to pay for a product (the OS) instead of Mac/Linux.
Re: Is it really free?
You don’t need to buy a license to use Bing. Or Mesh (Mesh.com), for that matter. I think Ballmer is just being clueless and talking without thinking.
Re: Re: Stevo is being cluess?
What else is new? What about flying chairs, are they free too?
Re: Re: Is it really free?
He does that pretty often.
Re: Re: Is it really free?
he means free as in there is no income being made by it. (You guys seem to be mistaken by the fact that you think that if a user doesn’t pay then its completely free.)
Well it is free for users, but revenue is being made through ads. Therefore its not free. It creates revenue, but doesn’t ask users for money.
It is useless as a company to offer stuff for free, there is always some earnigns expected from it.
Re: Is it really free?
But that wouldn’t make sense, because giving away apps as a reason for people to buy the phone would be the same as giving away Windows-specific software like Windows Media Player to get people to buy Windows.
Regardless, I don’t think the AP article is sufficient to determine what he means by this. He could just be agreeing with Mike’s assessment of the “Give it away and pray” option.
Re: Is it really free?
How much does it cost to use Bing? Gmail? Free can be leveraged in many ways.
The key here is that Ballmer basically says that they can’t give software away for free because they expect to make money off of their work, which totally ignores the fact that his own company gives software away all the time (IE) if they think it will bring in money on other fronts (Windows).
Re: Is it really free?
I think another Poster already pointed this out, but there’s plenty of examples of free Microsoft products that don’t “require” other purchases like windows (bing, Flip4Mac™ and Windows Media® Player for Mac, silverlight), and yes those products appear to be part of a larger strategy to promote the brand and ultimately get revenue.
And to counter, Google also has many paid products (google appliance, app engine beyond quotas, licensed maps, adsense), while their free products are used as part of their larger strategy.
To be fair, I don’t think Ballmer is that clueless. I’d give him credit and say he’s intentionally spreading FUD to try to justify in consumer’s minds the places where they do charge licensing fees.
Re: Is it really free?
You understand completely. Free improvements to a product is not “free as a business model”, it’s just good customer support. having a decent anti-virus out there addresses one of the issues that has plagued Microsoft for a long time.
Without buying windows, the free product is useless. So this isn’t a free business model, sorry Mike.
Re: Re: Is it really free?
having a decent anti-virus out there addresses one of the issues that has plagued Microsoft for a long time.
I’ll argue that needing a decent anti-virus program is one of the issues that’s plagued Microsoft for a long time. Properly-designed and engineered operating systems are nearly impervious to viruses, which is why those of us who use them have no need of anti-virus software. So as a technical strategy, this is really the wrong approach; but as a business strategy, it’s brilliant, as it encourages learned dependence for the fix on the same entity that’s creating the problem.
Note: viruses. Not trojans. Trojans are a problem on all operating systems because they attack users, not code.
Re: Re: Re: Is it really free?
Produce a million lines of code. Make it widely available to every hacker kid in the universe. Allow third parties to add to the code. There will always be a way to get a virus through.
Actually, you make the point for me. Microsoft needed an update to their OS, this is part of it, so it isn’t free.
Re: Re: Re:2 Is it really free?
Oh look – I’m surfing the intarwebz – Wheeeee
Re: Re: Re: Is it really free?
I would argue that your OS is not impervious, or even nearly impervious, to viruses. There is little point to infecting an OS that is not widely distributed or in use. There won’t be enough fireworks for the person creating the attack to get noticed, which is generally the idea.
Re: Re: Re:2 Is it really free?
I would argue that your argument is getting so old that it should be banned from the Internet. If it were possible/easy, then someone would do it just to make the point.
Re: Re: Is it really free?
“Without buying windows, the free product is useless.”
Um, no, not quite…
Duh
So why is Steve Ballmer pretending otherwise?
It’s no secret that MS has been trying to win over Hollywood, ultimately by selling out their own customers – they’ll happily incorporate any DRM scheme that comes along from the entertainment industry if it means they can lock more people into their platform.
So it comes as no surprise that Ballmer would blithely mouth the popular mantra concerning “free” – he’s just winking at Dan Glickman.
Free vendor lock-in
Actually, nothing from MS is free. At the very least, their intent is to lock you into their system and applications. Then, at their option they can start charging whatever the market will bear. Any bets on how long before they offer a “premium” version of their anti-virus software that they will charge for? Or that if you are a business you will have to purchase a license or subscription?
Re: Free vendor lock-in
“Any bets on how long before they offer a “premium” version of their anti-virus software that they will charge for?”
http://onecare.live.com/standard/en-us/3/default.htm
-2.5 years
What do I win?
Re: Free vendor lock-in
I’m a hotmail user but I can export my mail and contacts and move to another vendor at anytime.
I believe he’s just totally freakin clueless, but who cares what I think?
Free is Priceless
Or, more logically:
Free generally gains goodwill
&
Goodwill is Priceless.
Correction Everything Free is not a business model
Yes giving everything away and not taking having any avenue for some sort of income is not a valid business model. It however can be a valid product model.
You can give away products for free as a way of promoting your expertise, support, or consulting services. Many companies build open source software and say ‘hey if you want high end support hire us and no one will be better at it as we built the thing’.
You can also give functional products away and sell more enterprise level features, or enhanced abilities.
‘Free’ is all about ancillary benefits and even Ballmer knows that. Now maybe he is talking in a purely economic theory perspective…yes everything costs something (time, expertise, energy, thought, etc) but you can have good business model based on products with zero monetary cost.
Is Bing really free?
Don’t/won’t they make money from advertisements? It’s free to user but someone does pay for it!
It's free, but makes money through complimentary products.
SaratogaSam touched on something for all of these examples. All of MS’s products are in one way or another used to gain revenue through another product, or avenue of that product. Andriod from Google does nothing like that. I believe thats what Ballmer was refering to, and he explained it poorly.
-Bing sells ad space, but free for people who search.
-Silverlight is used to leverage more sales of Visual Studio, and possibly windows server.
This list could go on.
Re: It's free, but makes money through complimentary products.
“All of MS’s products are in one way or another used to gain revenue through another product, or avenue of that product. Andriod from Google does nothing like that.”
Really? You can use an Android phone to get directions to a local restaurant. What will I see next to those directions? Add’s. Seems to me like Google’s Android is doing exactly that.
I was skimming though Google reader, and read this article. After I was finished I went to the 1up.com feed. The very first headline I read after reading this article was Microsoft Packing in Free Car Pack with New Copies of Forza 3. The article talks about how MS is using free bonus content as an incentive to get customers to buy new copies of the game, instead of used copies in the resale market. Seems like a decent idea to me, but I just found the timing of reading that headline rather humorous.
“…is he just expecting that the reporter and the readers of the article are flat-out stupid?”
Given the outlandish prices they charge (and firms gladly pay) for true software dogs like Sharepoint, Team Foundation Server and Visual Studio when there are completely free open source alternatives available, I think Mr Balmer rightly epects that in general the managers of IT departments are complete idiots.
He is right!
“free” by itself isnt a business model but only part of a complete business strategy.
I agree with a lot of what you say Michael about “free” in general but this is a pretty dumb view on an isolated quote.
Duh
Neither is “for money”.
(to be fair, I’m assuming he’s referring to “money”)
Business *models* are a bit more sophisticated than “make something and charge for it”. Have been for a long time.
“Give the music away for free, charge for performance” is as old as music. Had to be; copyright didn’t exist for most of human history. And even now is largely unenforceable. Publishers are a gap play enabled by a brief trick of technology (cheap mass production coming a few decades before cheap mass distribution).
“Make free software and charge for service” has been around as long as electronic computers. Software without a computer is pretty useless. And a computer without software is pretty useless.
Isn’t MS’s entire business model based on giving people the mistaken idea the OS *is* free, since it comes with the computer?
If people had to buy a computer and OS separately (ie: they had to separate out the purchases, instead of thinking of it as “included in the cost”), my bet is that MS would have much less of the market.
Consider BeOS, *nix, OSX, MSWin, etc., all able to run on any standards compliant PC HW that a user could buy.
Who would have the most market share? I’d bet serious money it would not be MS.
Steve’s an ignorant ass.
MS / Free Stuff
Mike, maybe it’s you who’s clueless. Nothing is ever “FREE”. I think Steve is talking in general. If you want to know if he knows about the so called free stuff, why don’t you just ask him ?
Re: MS / Free Stuff
Mike, maybe it’s you who’s clueless.
It is always a possibility. But, if you’re going to suggest it, why not back it up with some evidence?
Nothing is ever “FREE”.
Ok. So, then why even mention it. If nothing is ever free, then Ballmer made just as big a mistake in claiming that Android is free. As you said, nothing is free, and then Ballmer is still clueless about his competitor’s offering (based on what you said).
I think Steve is talking in general.
That doesn’t change the fact that it’s wrong.
If you want to know if he knows about the so called free stuff, why don’t you just ask him ?
Hmm? So, are you saying I’m not allowed to comment on something that someone says to a reporter and is published in an article unless I first talk to them directly?
Just ignore him
Please just ignore Ballmer, he has been saying stupid things since 1980. Never stops talking, and it is always something totally stupid and it makes him look like a fool in the end.
?
“So why is Steve Ballmer pretending otherwise?”
Um…Because he’s a monumental douchebag?
Also free...
They also offer the “Express” version “Visual” programming components (Basic, C# etc) for free but will charge for more feature rich versions.
WTF!…..(no I did not mean WPF!)
Correction
“it’s” is a contraction of “it is”, not a possessive as you have used it here.
You can even play a game. How many free MS apps/services can you think of? Hotmail, MSN Messenger, Windows Live Mail (competing with Outlook), all the free viewers for MS doc formats, MSDN, all the Express developer tools, ASP.Net MVC, Bing, MyPhone, IE, MSPaint, Windows DVD Maker, Window Media Player, Sound Recorder, Window Mobility Center, Wordpad, SQL Server Express, DirectX, .Net Framework and SDK, etc. Granted, they are all commodities… but that’s basically the point of free in their business model.
nop, not free from M$
all said free items from M$ are just weapons to suffocate his rivals and eventually are expensive lunches for end users of M$ products.
He’s Got A Point
Compare Internet Explorer with Mozilla Firefox. The former is in inexorable decline, while the latter is thriving. Yes, IE still has the larger installed base, but not for that much longer.
Why the difference? Because Microsoft has no business model for Internet Explorer—it’s just a freebie they give away with their OS, and one which is very expensive for them to continue to develop and support.
Whereas Mozilla has a business model for Firefox, and is doing very well out of it. Not to mention the whole ecosystem of add-ons like GreaseMonkey, Firebug and so on, that add so much value for users.
Developers
Developers
Developers
Developers
Oh – yeah, and we’re going to F’in kill Google
It does seem a bit unfair to parse a general comment to make an individual look as if they are uninformed.
Mr. Ballmer made a general statement. If every time he spoke he was forced to do so in a manner that satifies the “parsers”, such statements would have to contains so many qualifiers that they would approach the length of a legal brief.
Re: “General Comment”
It does seem a bit unfair to parse a general comment to make an individual look as if they are uninformed.
What does “general comment” mean? Did he mean what he said, or was he just spouting hot air?
xbox live...not free
Now I know Microsoft has a few free programs it offers along with windows given how bad of a rap windows has, but look at the xbox, nothing there is free, nada. They are consistantly trying to add value to the paid membership which makes the consumer pay to play games online with other paying consumers. Then look at their peripherals for the xbox, $100 for a wifi adapter? To add insult to injury its an a,b network adapter not even an N which is still a rip off at $100. Or their previous 20GB HDD for $100!
talk about completely out of whack pricing. They get paid on 3 ends with the xbox, 1) hardware/software sales, 2) xbox live memberships, and 3) advertisers who advertise to the customers paying for xbox live both in game and in the dashboard.
” “Free is not a business model,” he said. “
He didn’t say free can’t be part of a business model, did he? Isn’t that what you say all the time – that free by itself is not a model, but it can be part of many models?
“We are a commercial company, we will look to gain revenue and profit from our activities. You’ll have to ask our competitors if they’ll make money on free things.”
“Clearly, Microsoft seems to recognize that free is a part of lots of smart business models…”
Sure they do, but when did they ever say free alone was a good model?
“..so why is its CEO apparently acting clueless on this front?”
How is he acting clueless when he states free is not a model?
“So why is Steve Ballmer pretending otherwise?”
He’s not. You’re the one who’s twisting his words.
Re: Re:
He didn’t say free can’t be part of a business model, did he? Isn’t that what you say all the time – that free by itself is not a model, but it can be part of many models?
He responded to a question about how Android is being marketed — which is “free as a part of a business model” — and he mocked it as being free with no business model.
And yet, his company does the exact same thing on my products.
I did not misinterpret him. I quoted him accurately and within context. Your attempt to debunk what I said is taking him out of context.
Try again, please.
Complete Idiots
You are all stupid even the author, he said it is not a business model. Meaning in and of itself. Free can be a part which MS does well, they know what will sell and will build image to help sales. Its as simple as that.
Microsoft is not free
Ballmer is not ignorant, and his comments are not inconsistent with his company’s practices.
Last time I checked, Microsoft is using a number of business models across their vast range of products and services. The primary one — that has been fattening the portfolios of MSFT shareholders for many years — is to set standards for OS and core applications (Windows, Outlook, Office for example) and then charge the user and developer community rents for using them, primarily through hardware bundling and upgrade licenses.
Does Microsoft give out some stuff for free? Of course they do. Several examples have been cited by earlier posters. Is that Microsoft’s business model? Not really. I get free samples at Costco and that’s part of the reason I like to shop there, but Costco isn’t an example of a “free” business model. To be honest, Google isn’t either. Google rakes in oodles of dough by attracting eyeballs to “free” products like gmail, search, etc., and then selling them to advertisers. When someone buys the advertisers’ products as a result of that exposure, they are indirectly compensating Google for the service that attracted them in the first place.
The point that I have not seen emphasized here is that Google is a media company while Microsoft is a software company. At this point they cannot compete with Google in the mobile space or anywhere else on the same terms (free to the consumer) so they are going about it the way they know best, through hardware bundling.
Ballmer is correct to critique the “free” model from the standpoint of Microsoft, since its non-free products are still making lots of money; and its “free” (i.e. advertising-supported) products are business flops since they have not gotten anywhere near the critical mass of users (eyeballs) as Google. Maybe the IT industry can actually support more than one business model.
EG
Market Penetration
Bill Gates most genius move in the 80’s was to ignore the rampant “piracy” of DOS up to and including DOS version 2.1.
The fact that millions installed DOS on their systems “for free” created the market domination that MS exploits to this day.
Its understandable Ballmer would not to see an upstart somehow repeat that coup.
Today, “free to use” can directly translate to profit, not just market saturation.
Free is (unofficially) a huge part of Microsoft’s business model.
http://www.techdirt.com/articles/20070312/165448.shtml
Microsoft could, for example, create a WGA/OGA-style system that actually works well and is very difficult to get around. But they won’t because having people switch to Linux or OpenOffice hurts them a lot harder than having people pirate windows or MS Office.
Re: Re:
bang on.. MS supposedly “bled” in India because of rampant piracy for years but now they are minting money from government deals AND the fact that the teenagers who grew up using windows don’t want to shift to anything else – now that they are earning and can afford MS products.
Re: Re: Re:
Err.. the comment above is from me.. accidentally signed out
And yeah, on the subject ‘free’ is not a business model but it can serve different purposes. From my own experience; In our free project management tool (Remindo.com) – ‘free’ has helped us get an initial set of users who helped us build the product and now when we launch our paid services, we intend to keep them free for this lot.
Punching Steve Ballmer in the face
Punching Steve Ballmer in the face is not a business model either, but people love it
Indeed
This was a major mistake from a company CEO, Microsoft have indeed earnt a lot of money from the free business model.
To the commentor who wrote the following however..
“The key here is that Ballmer basically says that they can’t give software away for free because they expect to make money off of their work, which totally ignores the fact that his own company gives software away all the time (IE) if they think it will bring in money on other fronts (Windows).”
How does IE bring in money via windows? windows makes money because it is a convenient operating system for most people, it is compatable, stable (Nowadays), and adaptable.
IE brings in money via the microsoft homepage, and its inbuilt search functionality.
The new Google Chrome browser is free, and while it does put its own search engine first, it presses nowhere near as hard is MS on selling on Googles profit making businesses.
The Google ethos is on customer satisfaction, ease of use and simplicity, the money grew out of that. The Microsoft ethos has always been on the money, which has worked equally well in other aspects, ie. buying windows on every PC that leaves the shop. The downside for Microsoft is that it means it is hard to compete against superior free products in other sectors, and of course it gives it a much more impersonal reputation.
Re: Indeed
Google is a publicly traded company, whose main goal is to raise stock prices for their share holders.
All of the free products that Google have, are in a business model to eventually get it’s users in some way or another to purchase and/or view advertisements from Google.
Hence in all ways, Google is eventually getting paid. By either having customers put advertisements on their products (i.e search) or directly purchasing a product from Google.
Google and Microsoft’s business models are very similar, and it’s humorous some people cannot see the similarity. Open your eyes… and find out… they both care about their bottom line. If that was not the case, Google would NEVER show advertisements, ALL products would be free, and THEY WOULD not be in “business” (i.e operational).
Re: Re: Indeed
Uh…there isn’t anyone who thinks Google isn’t a money-making business.
What’s humorous is people like you who think that this distinction actually matters.
Actually... your clueless
If you actually read the article you would know that Ballmer was stating that Windows Mobile OS is not free. He NEVER mentioned any other products. So actually… your clueless for not having the ability to actually read.
The only reason why some Google products and some Microsoft products are free, are to entice the user to eventually “purchase” a product.
Just as why you are able to watch “free” television while being forced to watch commercials. In actuality… none of this is free. Someone down the line, is in fact paying for it.
Wow
If Ballmer says so then it must be so!
RT
http://www.true-privacy.net.tc
Um ...
Context?
More techdirt horseshit
The stream of idiocy that pours from this site is truly astounding. Those products are free because they are strategic tools to prevent the displacement of its extremely profitable and paid software. It’s about protecting revenue and undermining your competitors, not generating revenue.
Nobody on this site has the faintest idea how the real world operates.
Re: More techdirt horseshit
So letting people see advertisements for free doesn’t generate revenue?
And apparently is a bankrupt company, considering the offered the free service before they even had paid software. Of course, they give away their software too…so they must be billions in deficit!
Re: Re: More techdirt horseshit
^ And of course, I ruin a sarcastic rant by forgetting to name “Google”…
He clearly meant that companies who make their living with free products are not a threat to them. In that sense, he makes a good point. Many of these free security software offerings are seeing their funding dry up due to a lack of incoming revenue. It is a fantastic way to do business in theory, but in practice it is just not very sustainable.