One of the most interesting developments of the Web 2.0 revolution is the explosion of freeware on the intranet – free applications, software, games, sites and programs available to all for little more than the time for easy registration of approval of simple legal disclaimers. The latest example – as detailed in this post by Andy Sernovitz – is Adobe’s free web-based version of Photoshop. As Sernovitz mentions, Adobe likely had no short-term economic imperative for introducing this free software – in fact, they could probably make more money by continuing to charge for this essential and popular application. But in the new Web environment – with a proliferation of free applications online, collaborative product development and higher expectations by customers – the old business rules aren’t necessarily the right ones. Customer loyalty and positive word-of-mouth may get more of a boost by opening the door wider, rather than squeezing every opportunity for revenue. Needless to say, this concept is anathema to Wall Street priorities and valuation.

I’ve seen essentially four reactions to this development. Some (including a surprising amount of folks involved in IT) are basically unaware of the trend and have no idea of the incredible range of free online products and services. They’ve never heard of Google Docs, WordPress or even LinkedIn. Others are both cynical and skeptical, and doubt that any smart company would actually provide worthwhile applications online at no cost. “It just doesn’t make any sense” they claim, or go on to suggest the software or applications are probably of dubious quality. Some just seem to be more comfortable with the tried-and-true; they’d rather pay onerous licensing fees and stick to the well known companies rather than take a chance on upstarts. Finally, there is a group (in which I include myself) that is thrilled to find so many free or cheap choices online. It didn’t take long for me to be convinced of the value of this trend – I am using a free platform to publish this blog.

Can this new economic model be sustained? Well, I suppose we can observe Google as an example of success – at least in the short term. They provide a wide menu of services for free and leverage advertising as their main source of income. Presumably, this approach fosters strong brand loyalty and repeat visits to their plethora of products and business explorations. Whatever the rationale or outcome, I am very glad they gave it a try. Call me one of the new breed of customers.