The Free Strategy: When Giving Away Your Product Is Positioning
When a company suddenly makes something valuable almost free, it is not generosity. It is strategy. Here is how big players do it, and what small ones should learn.
One pattern I keep seeing in tech products. When a company suddenly makes something valuable almost free, it is not generosity. It is strategy.
OpenAI dropped the cost of its models dramatically, collapsing the market others were profiting from. At first glance it looks irrational. But it is not. They are not trying to win the pricing game. They are trying to make pricing irrelevant.
Burn what others sell to defend what you keep
- Google gave away a free browser because the real money is in ads.
- Apple keeps iCloud storage cheap because the real money is in hardware and ecosystem lock-in.
- Amazon sells Kindle books at almost no margin because the real money is in keeping you in Prime.
- Facebook made internet access cheaper because the real money is in attention.
Each of them burned what others sell to defend what actually makes them profitable.
The same moves happen locally
I see distinct but similar moves in Ethiopia too. Yango made rides unbelievably cheap compared to the rest of the market. Feres kept its driver fee very low for years compared to Ride. On the surface it looks like competition. In reality, it is positioning.
The practical takeaway for builders is this. Sometimes protecting your business means giving part of it away. It is less about what can we charge for, and more about what are we truly defending.
Big players win by changing the rules. Small players win by mastering one rule better than anyone else.
The small player version is focus, not firepower
Not everyone can afford this strategy. Startups and smaller players do not have the margin to burn. They cannot give away revenue to protect market position because they are still fighting to earn one.
So if you are small, your version of this play is focus, not firepower. Make one thing so distinct, so indispensable, that even if others make it free, yours still matters. You cannot win a price war you cannot afford. You can win a focus war nobody else is fighting.