"Free" is a tricky concept on the web. I've struggled with finding the right balance of offering "free" vs. "paid" service for several years, and I'm not sure I have it right yet, but here are some things I've learned so far:
1) People won't buy what they can get elsewhere for free. If the exact same product you're selling is readily available to the customer (and they know it), they aren't going to spend money on the product. Now, that's assuming it truly is the exact same product - with the same level of quality, and in the case of the web, security. There's really no need to offer a paid URL shortener, for example, at this point in time, because there are MANY reliable ones already available for free. Now, a custom URL shortener...that's a different story.
2) People believe that they're getting what they've paid for. I had to learn this one the hard way, when it came to providing assistance with certain search engine optimization and social media marketing training. There were people selling seminars for hundreds of dollars to teach the exact same thing I wanted to teach people on a shoestring for free. Guess what? People opted for the expensive seminars, believing, apparently, that the "free" service simply wasn't worth their time.
3) "Free samples" really only works with hungry people and food. If you're offering any other product or service, giving people a free sample of the product, thinking they'll come back to you when they want more doesn't work. It just doesn't. People grab the free stuff, then go shopping on e-Bay, or to their geek-friend, or figure out how to recreate the product themselves. Most of the time they don't even remember where they got the sample.
4) Promotional items need to have your web address and/or watermark on them. A good example of this concept in action is icanhascheezburger.com. They let people embed their photos and videos anywhere, but the photos all have the web address of original website. It's basically free advertising. Yes, the logo can be removed, but most people aren't going to bother doing that. If you're going to offer a white paper, just upload the thing to your website, and send out the link. That way, people will come to your website to read it, and the name of your company will be in the URL. If you're going to offer free wallpapers or backgrounds, make sure your logo and website address are included, at least in the form of a watermark.
Have you learned a lesson the hard way about offering goods or services for free? We'd love to hear your stories!
Jennifer Pointer (e-mail) is in Tulsa, OK. She promotes a simple, a low-tech approach to effective online profile management, search engine optimization and social networking.