A World Where All Technology Products Are Free (GOOG)(AAPL)(MSFT)

Many of the 65,000 Apps available at the Apple (AAPL) iPhone store are free. Microsoft (MSFT) is going to give away an online version of its new Office software.

It may not occur to many consumers, but the notion that Google (GOOG) allows people to search the Internet with magical efficiency without paying the company is extraordinary. Google supporters would argue that advertising supports that company and that users support the advertisers, but that does not change the fact that the Google service is remarkably valuable and the people who have efficient work and personal lives in part because of it are lucky.

The “technology” industry, looked at as a composite of hardware, software, and internet services, is going the “free” route and it may bite the sector the same way that giving away content online has hurt media companies. Google’s belief is that allowing customers to use maps for free, search for free, e-mail for free, and valuable products like word processing at no charge makes customers more loyal to Google. Loyalty only has a value in commerce if the links can be exploited for the purposes of profit. Free for frees sake is a dead end.

Microsoft has never been much for free. It has made hundreds of billions of dollars in profits from charging premium prices for premium products. The firm is not obviously concerned that Google’s inexpensive Chrome operating system for PCs and its apps offerings for businesses, which are remarkably cheap, will undermine its huge operating system and Office franchises.

A decade ago, the big threat to Microsoft was supposed to be Linux, the free open-source operating system built by engineers around the world who provided their programming time at no cost. As it turned out, getting the programmers to work toward a common goal was like herding cats. Linux has been a bust. Microsoft never had anything to worry about.

Microsoft is about to learn that free does remarkably little for the bottom line and has no place at one of the world’s most profitable companies.

Douglas A. McIntyre