Free is not a business model, or is it?

eBay entered the Chinese market by buying EachNet. The largest copy-cat site in China.

Then went about completely changing the user interface in line with its corporate US centric branding and functions.

This went totally against how Chinese consumers bought online, and lost eBay many customers and market traction.

Jack Ma (Alibaba.com founder) spotted an opportunity and created a rival site called TaoBao, allowing Chinese consumers to use its basic functions for free, and only pay for premium listing services, such as product advertising.

This move captured much of eBays past customers, leading eBay to put out a Chinese press release aimed at Ma and TaoBao, which said, ‘free is not a business model’ and went on to claim, ‘giving people something for nothing is not sustainable’.

Ma ignored eBay and as TaoBao grew its user base to millions, power sellers and major brands increased their spend on premium services (such as advertising) to position their products to the correct target audience.

eBay then CEO Meg Whitman came to China to try and fix their problems, even meeting Ma to try cut a deal.

Ma ignored their pleas, accelerating his ‘free’ business model, and eBay pulled out of China completely within a year.

‘Free’ as a business model can work in the right circumstances, providing huge value to customers.

We’ve adopted it with print & scan technology, internet phone systems and laptops bundled with Office 365.

We provide the technology for free (saving £1,000’s in many instances), and all the customer pays is an affordable monthly fee for what you print, the calls you make and service you use.

We even throw in life-time maintenance and support too.

…could ‘free as a business model’ provide value to your customers too?