Sunday, April 18, 2010

Ning is, or was, a free service that many interested in education have used to create social networks. From their web site:

Ning is the social platform for the world's interests and passions online. Millions of people every day are coming together across Ning to explore and express their interests, discover new passions, and meet new people around shared pursuits.

Ning's Jason Rosenthal, who has been their CEO for a month, announced the end of free services this week. The knee jerk response to this event is to say, "This is what you get when you place yourself in the hands of proprietary services."

Of course some will try to apply this generalization to iTunes U, the iTunes Store Podcast Directory and other free services painting them all with the same very wide brush.  Is there a difference and, if so, what is it and why should we expect a different outcome?

I think that the difference is not simply the fact that Apple is profitable but that what Apple does for free actually generates income, albeit indirectly.  The iTunes Store, the part where you pay for stuff, is not a big profit center.  They do slightly better than break even.  This is also true of the MacOS and application software such as iWork, Final Cut etc.

All of these free and low margin products generate sales of Apple hardware and that’s where the profit margins are very healthy.  They are a hardware company.  Apple dominates (90%) the market for computers that cost more than $1,000.  They dominate the portable media player market with the iPod and are well on their way toward dominating the mobile phone and mobile computer markets with the iPhone, iPod touch and iPad.  

So “free” can be fraught with danger but that risk can also be managed by making intelligent and well informed choices about which free things you predicate your programs upon. I see iTunes U and the larger Apple ecosystem that makes it possible as a much lower risk than Ning and other services that have to stand on their own and deliver profits to shareholders.

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