The most sound of business plans is to provide a product or service, and to charge money for it. Real, no fooling money. The paper stuff you have to give the grocery store for a loaf of bread. It’s a simple economic proposition, proven with markets from Azalea Bushes to Zebra Farms, but it is one that the technology world has been moving steadily away from for awhile now.

For years we have been hearing the cry for free. Free services, free content, free exposure. But free for the sake of being free is an idea that may be coming to an end.

There are some ways to be free and make money, so let’s look at those first. In the cases where a company is making a profit providing something for free, there is always an underlying method of generating revenue. These tend to fall into three patterns.

1. “Free Services”. A limited service that has a paid upgrade if you want the good stuff. Flickr is the big dog in this arena. If you want to use Flickr for free, you are more than welcome to sign up and do so, as long as you accept limitations on uploads and some of the social features. If you use Flickr for awhile and like it, you can sign up for a pro account, and gain access to the whole thing. The idea here is try-before-you-buy. Flickr will give you a taste of the good stuff for nothing. Since they control how much you get, they can hedge their bets and assume that if you don’t pay up in the end, your free usage won’t cost them enough money to make a difference. If you do go pro, chances are you use the service and it’s features a lot, and therefore add to the value of the community.

2. “Free Content”. Come to the site and check out all our great stuff, but make sure you look at, and click on, some advertisements while you are here. This one is based on the old media models centered in Broadcast Television and Radio. You can watch free network TV (provided you bought a TV) and listen to terrestrial radio all you want for free, you just have to sit through the commercials. This model works pretty well, as long as the company provides good content that makes people want to come to the site. ESPN.com is a great example of the “Free Content” model. ESPN.com provides everything a serious sports fan wants. In return, they get a highly dedicated group of users that represent a prime market for advertisers. They took content that was tailored to a specific audience and sold advertising against that audience.

3. “Free Exposure”. Hey, check out this cool little thing that we made to give to you. You like that, don’t you? Well, you should check out these other things we have, too. These other things cost money. The “Free Exposure” idea is an offshoot of the “Free Services” idea. However, in this case you give something away for free without every planning to charge for it. The hope is that people will be so impressed with what you gave them that they will think well of your products and buy some of the ones that actually make you money. An example here is the iPhone Development house Tapulous. Tapulous produces the free, and hugely popular, iPhone game Tap Tap Revenge. The game is a variation on rhythm video games like Guitar Hero. Tapulous is a venture funded company that employs several people. They will be releasing products that cost money. The current lead rumor on that front points to a version of Tap Tap Revenge that features NIN music to play the game to. This product would be a direct ancestor of Tap Tap Revenge, a product that many people already know and love. My guess is that many of those people will buy the NIN version.

Now let’s take a look at these three models and see where they might fail.

1. “Free Services”. A free service that charges for an upgrade to the pro level must provide some compelling reason to move up to the next level. I’m not going to give specific examples of the problem, or offer a solution. If I knew the magic key to converting users to paid customers I’d be coding right now instead of writing this. I’ll leave it at this: a service that gives too much away in the free section, or that tacks on non-meaningful “value adds” that don’t truly add value, won’t convert it’s users. If HBO gave away The Sopranos for free, few people would pay extra to get access to Real Sports (some would pay for Real Sex, but porn has a habit of making money).

2. “Free Content”. The downfall in this model is that the free content may be worth nothing. The biggest thing that users are committing to the “Free Content” sites is time. Time that could be spent elsewhere. Take a look at Merlin Mann’s Time, Attention, and Creative Work article to get an idea of what your time is really worth. If a “Free Content” site doesn’t provide good enough content to keep users coming, they can’t sell ads against their audience. To add to that problem, “Free Content” sites have to balance the amount of advertisement the users will stomach before they leave. Once they are gone, they are really gone, so showing three 30 second ads before a 15 second video is usually a bad idea.

3. “Free Exposure”. The danger here is two-fold. Sometimes the free product is badly produced, signifying to the user nothing more than a cheap sales pitch. Other times, the products for sale don’t meet any real demand, and the company depends on the good wuffie they have accumulated to do the selling for them. Once the users find out the pay services or applications are crap, a reverse of the “Free Exposure” idea is started, “Payed Bad Exposure”. Rarely are people as upset with a bad free product as they are with a bad product they shelled out money to use.

So what does this have to do with developing apps for the iPhone/iPod Touch? In the end, all of this goes back to what we are hoping to achieve with Good Touch Software. We don’t want to produce apps that fall into the traps of “Free”. We believe in producing good apps that provide something of value, and we think those apps should charge money. At the same time, we are open to building free applications, but only to building them correctly. Anything we build for free will be finished and polished, we aren’t willing to risk our reputation on half-baked applications.

We make money, not art. However, the only good way to make money is to make art. We want to create well crafted, useful, and beautiful products, whether they be free or cost $9999.99.