Where does the profit come from?

[bmarone]

Just out of curiosity, when it comes to programs such as facebook and microsoft, where does the profit/wealth come from if these programs are offered mainly for free? I know facebook participates in ads and microsoft offers more advanced programs for added profit, but I don't believe they started out like this. In the case of facebook, I don't believe there were any ads or PPC programs to start with. It was just the bare essentials of the website alone; yet the worth of facebook continued to climb.

I ask this because my program/software, which is in the development phase right now, will not be a type of program I could offer for a profit, yet I believe, like facebook, it will be widely used by the populace (i.e. an internet browser). Any help would be appreciated. Thanks.

Brandon

 

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[exige]

Facebook went deep running on investor money before monetizing with ads and they are still figuring it out. Microsoft makes profit from their OEM license sales, enterprise volume licensing, etc. and 2nd and 3rd order profits. The "free" stuff like browsers etc. from them is just to hook people into their ecosystem. They are definitely not "free" ;-)

I'm not sure how well the "get big fast and sell" approach works anymore.

 

[Nick]

The "free stuff" that those companies offer is initially subsidized by either:

A) Investment money from VC companies until critical mass is achieved, such as the case for Facebook, then the monetization process starts (ads + promoted likes, and etc...)

B) Other products that are cash cows, example, Microsoft makes money with Windows and Microsoft Office suite, which are paid, and they offer for free stuff like Internet Explorer, msn, etc.. to hook you up into their ecosystem.

If your business model is only to give stuff away for free cause people will use it without a further business model, you won't be in business for very long.