DOP 286: The Hidden Costs of Free Services
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I know that my data is being leaked into Google and used for God knows what, but I'm aware of it up to a level and I accept that as a payment, right? And I realistically benefit from it. This is DevOps Paradox, episode number 286, the hidden cost of free services. Welcome to DevOps Paradox. This is a podcast about random stuff in which we, Darren and Victor, pretend we know what we're talking about.

Most of the time, we mask our ignorance by putting the word DevOps everywhere we can and mix it with random buzzwords like Kubernetes, serverless, CICD, team productivity, islands of happiness, and other fancy expressions that make us sound like we know what we're doing. Occasionally, we invite guests who do know something, but we do not do that often since they might make us look incompetent.

The truth is out there, and there is no way we are going to find it. P.S. It's Darren reading this text and feeling embarrassed that Victor made me do it. Here are your hosts, Darren Pope and Victor Farsen. Back on September 24th, 2024, Cloudflare announced, and I'm going to read from an article that was also down in the episode description, that

Content delivery network provider Cloudflare today announced that it's making key security tools, including its zero-trust platform Cloudflare One, available for free. Free. There's no asterisks or anything else that I see here. Victor, what do you think about this? I mean, it's great. Who doesn't like free? That's it. That's the end of the show. Well, I can tell you one person that doesn't like it, and that's shareholders.

I mean, I don't know for Cloudflare specifically, right? But let's say that almost nobody gives away things for free for no reason, right? There is a reason behind that. And the reasons can be many. And the most common one, even though I'm not sure that is the case for Cloudflare, is go-to-market. We give away something for free because that leads to adoption. Adoption leads to sales of something else.

That's by far the most common reason why people give away things for free. Or companies, to be more precise. There are others like, it could be, hey, this is...

This is important for us, how we operate, and we might want to have help from others on this thing, right? We're not going to commercialize it, and Cloudflare is probably not going to sell those tools, right? I wouldn't be surprised if that's something that they're reusing internally or something like that, right? So they're not cannibalizing, in this case, their sales, right?

But hey, they're putting a bit of marketing on them and some other people might improve it so that Cloudflare benefits internally from it and so on and so forth. There are other reasons, like let's say I would like to attract top talent to my company, right? And top talent is sometimes very much focused on open source and so on and so forth. So for example, a good example of that would be

Netflix, right? Everybody knows about Netflix. Everybody wants to work in Netflix. I never heard anybody saying, I would like to work in HBO. And they're very similar companies, right? Because, hey, Netflix gave away things for free, got some street creds.

went on some talks, conferences, what's or not, right? So they're giving away things for free as well. Again, a very different reason than the previous ones I'm mentioning. There are quite a few others, but most of the time there is a reason why something is given for free.

Okay, let me put it actually in better terms or better words. There is a reason why somebody's investment is given away for free. And that's the basis of today's show. Why are companies giving away free services? We can give away free software, right? And we're used to that. That's open source. Oh, so Cloudflare is a service or a software service?

It's a service. It is a service. I did not catch that part. Yeah, so it's all service. So we're used to, okay, I can download something. We'll use Netflix for a second. Netflix had all of the tools, Eureka. I mean, they open source so many things. So as a developer, it was a great way to get in. There's other companies that have shown up at conferences and sponsored conferences that

mainly to get a pipeline of people to come in as developers. But this, how can you justify a company giving away its service for free? You've already led into it a little bit. It could be sort of a go-to-market, not necessarily go-to-market when you think of a startup go-to-market, but it's still a go-to-market for something to go and, I guess, sit at the table and eat some of the other things. Keep itself in the news as well, right?

And we just heard about and we are talking about Cloudflare right now and giving them free promotion because of what they open sourced. Now, I don't know what the reasons are for open sourcing. Well, they didn't open source it. Let me stop. Sorry, but they're giving it for free. For free. Yes. Big difference. So I think about some of the services that I use. I use and we'll just throw names out there today since we're naming names. I use TwinGate.

for some of my remote access back into my quote unquote home lab, which is a couple of Raspberry Pis. It just makes it convenient. But because I fit underneath their free tier, it's perfect for me. That's a great example, right? That is now already go to market. If you would be in a company that needs something similar, but at larger scale, right, doesn't fit into the free tier that you're using.

Would you recommend Wingate? Would you choose it? Or would you look for something else? I would still put it on my list of items to consider because there is Tailscale keeping everything in that same family. Or maybe I would even take a look at VPNs, even though that would be so 1990s. But it wouldn't come off the list just because I was using it as a Homeland item. Exactly. And now here's a follow-up question.

What are the, I know that you cannot answer it with absolute certainty, but what are the chances that you would even know about it and consider it? What are the chances that it would be on your list if you're not using it for free right now? It would probably be a very small, low percentage. Probably not zero because I would have done research and I would have probably gotten ads at some point seeing the name. Or I've been in a forum and people will say, let's say I'd been using Tailscale.

And I was in a forum coming up with a problem about tail scale. I'm not saying there's problems with tail scale, but just I was looking for an issue and somebody might have said, hey, look, there's this other thing is TwinGate that also does basically the same thing and it covers your use case. Exactly. And then there is a chance that that person telling you that he is coming from the or started using it for free.

Again, I cannot be 100% sure what are the intentions of each single company, but that sounds pretty much like go-to-market. Let's go to probably one of the biggest betas ever run. Do you know which one I'm talking about? Gmail? Gmail. Oh, first attempt. Yeah. Do I get the star or something? Sure, you get a gold star tonight for that. But Gmail is a free service.

Until you get suckered in to buy Google Workspaces. Because you used to be able to get Google Workspaces for free up to a certain count of users. That was dropped a few years ago. So now I'm paying for Google Workspace. I have three user accounts. I have me, I have my wife, and I have a third account that's not tied to either one of us as a safety. So I'm paying for that safety. I pay $21.60 a month. Me too. And I also have three accounts.

No, four. Okay. So you're paying a little bit more than me. But what do we get with that? Well, I can go in and turn off things that I don't want to happen. Like I can go into Chrome and say, don't save passwords inside of Chrome because I'm paying for that. Again, do I want to be paying for email? No. It's sort of a plus or minus, and I don't know this to be true. But if something's free, you are the person

Yes. Right. You are the product. Now I don't know about Google workspaces. I'm paying for it. So hopefully I'm not as much of a product as I was when I was just using Gmail or using the free versions of Google workspace. So it's sort of a trade-off, right? You've got to think about, okay, if I'm using a free service, what's being traded off in the background email, were they scanning all my email? I don't know.

If I were them, I probably would have. Yeah. In case of Gmail, almost certainly, yes. Yeah. Because targeting ads, doing all the other things. Data is their business. Data is their business. Well, ads is their business, which data drives. It all depends how you look at it, right? Maybe Gmail is not the best example, but if you go to the previous one, apart from being go-to-market or whatever other motivation is, it's also from certain perspective that small guys...

get things for free that is financed by bigger guys. And that's very common in open source. Like, hey, you need this tool. Cool, use it. You're a person. You're a small team. There is absolutely no good reason for many projects people to pay for, right? And then that expense is offloaded to big companies.

They do pay for licenses because they wish the number of users or they need special features that small guys don't need and so on and so forth. The side effect of all that is that people get things for free. Sometimes without, like in case of Gmail, you're a product, right? But sometimes literally for free, there is nothing behind it.

Just to get for free with the hope that one day you will be a big company and you will pay for it or you will join a big company or pay for it. And until that happens, customers are actually financing small guys. It's almost like democratization of software and sometimes services as well. Here's another plus about using free services or why a company wants someone to use a free service. That's free testing. That as well.

Think about how many times going way back, we'll say Gmail again, think about all the iterations of Gmail over the years. If they wouldn't have had all the accounts on Gmail, do you think it would be as good? We can argue that point, but do you think it would be as good as it is today? Of course it would. It would neither be as good as it is today, nor you would have such good results in Google Maps because of Gmail. Yeah.

It's going back to the data, right? It is going back to the data. But you think about it. Hiring testers. Let's ignore AI for a minute there. I said AI. Okay, now we got that off the table. Ignoring testers or ignoring the cost of testers. Think about this. I mean, you've got testers and you have to pay people. Usually testers are a little bit cheaper than developers in general from a salary perspective. But now if I could get

300. Let's say it's not even a big service. If I can get 100, 200, 300 people using my service on a consistent basis, then that's going to explode. Hopefully not literally explode, but give me enough issues to work on for the next five years. Or maybe it gives me enough information to decide, you know what? This is not a going concern. We need to pull the plug soon. What else can happen? We get free testing when we give out a free service.

We get free data. That's the biggest one, probably. Do we get free money? Free money. I mean, it's 2024, so it's not free money anymore. If you do get free money from some service, then stay away from that. That's too much. That's too fishy then. No, I'm not talking about the person using the service getting free money. I'm talking about the company getting free money. Let's use this example. I've got a service. I've signed up 500 people for the service.

Company X comes to me as the service provider. It's like, hey, I'd like to run ads on your service. That's free money to me. It's not free. You're running that service. You're paid for the development of that service. You're paid for R&D and so on and so forth. It's not free money. It's just that money does not come from the obvious source. But there is a serious investment there. It's not free. Good. I'm glad you sort of filled that one out because no money is ever free.

Exactly. I mean, unless you're a state lottery, then it's free. I don't know how to answer that. We'll just move on. State lotteries are like printing money. I've worked with lotteries in the past. It's basically, hey, approximately here's 20% of everything that comes in back to the winners. The rest is like printing money, literally. And hopefully it goes to something useful, like schools or something. Yeah.

Yeah, they're usually non-profit organizations that have obscene salaries. Not going to argue that point. Okay, so not free money. What else could happen? So what are the other frees we could get out of this? As a company providing a free service, a quote-unquote free service, is it really free? I'm still having to pay for it. You've already said that the paying customers are hopefully offsetting some of it, but probably won't offset all of it.

When it's serviced, then there is always a catch. The real question is whether you know what the catch is. That's the first question. And the second is whether you're fine with it. I'm perfectly, I mean, not perfectly, but I like using Google Maps. I know that my data is being leaked into Google and used for God knows what, but I'm aware of it up to a level.

And I accept that as a payment, right? And I realistically benefit from it. You keep bringing up Google Maps. I mean, how much do we really care about it? Do you use Waze? Talk about invasive. Yeah, Waze is Google's company. Correct. It is. But you think about it. So it's one thing to use Google Maps, like you're offline or maybe you're on your phone and just looking on Google Maps, but you're probably doing a waypoint or you're just checking, okay, I'm here. I need to get to there.

Not much. Or where shall I eat today? Right. So you might get some ads out of that. But I think Waze, I guess it's probably not any worse. But Waze to me is now has the full history course thinking about it. Google Maps has the full history because I'm logged in. So, okay, whatever. Again, it's not evil. I could choose as a consumer not to use the free service, but then what would I use?

I mean, whether it's evil or not, that depends because realistically we are all guessing what the payment is. So you can say a bit more drastic example, right? Could be Facebook. Is it free? Yeah. Is it evil? Possibly. Okay. You're going down the social media route. I guess we could do that. Why not? There is no paid version of Meta's Facebook. Let's give Meta their dues here, right? There's no paid version of it. However, comma,

There is a quote-unquote paid version of X. Ignore the politics for a moment. There is a paid version that gives you extra features besides the blue checkmark. One of them, recently that they started enforcing, is being able to stream to X. Can't do that anymore. It's a common model, right? Eventually, most of them will restrict the features that are available in the free tier, right? That's probably the most common model.

way to earn money and actually probably the most honest one because that's so much clearer than hey I'm getting your data or I'm serving you ads or doing this and that right to me having a paid tier that gives you clear features that you might or might not need is more honest

Or clearer from the consumer perspective. Now, that does not mean that X is not combining those with others, just to be clear. So there are still ads, they're still getting data and what's not. But those features at least are clear. Similar to Google Workspace that you were mentioning before, right? Hey, you need users with this and that. You pay for it, you know what you're paying for. So it's interesting you bring up that angle of paying for things.

I'm thinking about streaming services. So not the Netflix, because actually I think there was an ad supported. I don't even remember anymore. They're rolling it out or rolled it out. Yeah, me too. I cannot watch ads. I can't. And here's the reason why I can watch ads. Only in certain scenarios. Prime used to be completely ad-free. Amazon Prime Video. True. Right? And now Amazon Prime Video...

puts in ads unless you pay an extra, in the US, I think it's $3 extra a month. Now, I am not going to pay $3 extra a month for Prime because I don't watch Prime that much. The interesting part of it is, unlike all the other services, Amazon Prime Video puts all of their ads up front in a two to three minute block. What am I usually doing during the very beginning of a movie? I'm probably running to the kitchen, getting a drink. So it's not like I'm impacted by it.

And I'm okay with that because then the ads don't drop in throughout the movie. Again, that's also a very relatively clear situation, right? You know that you have ads and you can pay not to have them. It's not dissimilar from, let's say, YouTube premium. Ignoring now whether they're at the end or in the middle or whatever, right? You can get it with ads. You can pay for it.

Companies prefer that you don't pay for it, by the way. That might be less obvious, but ads turned out to be more profitable than subscriptions. So as a company providing a free service, I need consumers. I don't like using the word consumer, but in this case, it's an exchange. But the problem is, going back to the Amazon Prime scenario, used to Amazon Prime videos, no ads at all. Now they've added in, they've restricted that. Or we could think back to other services.

I used to be able to get all of this included, but now they're taking away things from my free tier. And as a consumer, I'm playing the role of an angry consumer, I'm getting upset because I used to have it for free and now they're expecting me to pay for it. That can't be right. My answer to that is stop being so entitled. It's not only that. Specifically for Prime, right? I doubt that there are many, maybe even nobody, who...

started paying for Prime because of Prime Video. Most of us are paying for Prime for pre-delivery, right? Or one-day delivery or whatever for shopping. And then that just turned up to be, hey, we're going to give you this service as well. And by the way, it's horrible. Nobody watches our video Prime as much as others, right? But you're getting it for free. You're happy, right? Now ads are coming everywhere.

It's not a serious streaming service, so I don't mind that much. I don't watch it that much, right? What is to me much worse is that Netflix, for example, which I watch more, is jacking up the prices all the time. But you've been paying for it all along, so it's not abnormal for inflation to kick in and have prices increase. So that doesn't bother me any. Depends. I don't have the numbers now in front of me, but I'm pretty sure that the...

Price of Netflix was increasing more than inflation. I'm sure of that. Yeah, I'm not arguing that point. And actually, their prices increased more than what, significantly more than what you're supposed to be paying for Prime now, Prime Video. So yes, Prime Video, you went from zero to, I don't know, two or three bucks, right? Yeah.

And Netflix, you went from six to 12, 14, 15. Nobody knows how much anymore, right? Now, it psychologically feels bad, kind of. You know what? I'm going from zero. And I count it as zero because you're paying really for prime delivery, right? I went from zero to something or I get ads and I'm disappointed, right?

But Netflix has been asking much more and jacking it up much more than that. I'm not attacking Netflix in this case, just to be clear. But psychologically, it feels different, even though it's actually maybe worse on the other side. It might be. I haven't done the math. But let me ask you this. If you were to cut a streaming service, which would be the first to go? Would it be Netflix? No. So you'll happily pay the higher price. Because why? Yeah.

I mean, I wouldn't remove Prime because it's bundled with Prime for shopping, right? But if you would tell me, hey, Prime Video, that's a separate service, that goes to trash first. Zero doubt. No matter the price. Anything above zero, if it would be a separate service, would go to trash first. Right. Because you just don't consume it enough to justify the cost. Exactly. Exactly.

I mean, you know, something appears once a year, maybe twice. And okay, you know, every few months I open it. Is there something you know? Is there something? Oh, Lord of the Rings, something, something. Let me see it and get disappointed. But now, on the other hand, if Netflix was to double what you're paying today in the next 12 months, would you still pay for Netflix?

Probably not if they will go double, but that's because now there is competition, right? If you asked me that question like five years ago, I would say, yeah, I'm going to have to pay double, right? But now I have Apple TV as well. I have HBO. And without changing the prices, I would probably keep Netflix. Yeah, go double. I'm ditching it. There's enough now. So let's go back to our earlier examples. Let's say Tailscale was the only...

networking tool that we could have gotten at the time. And since then we've had TwinGate show up and we've had OpenZD from NetFoundry, which is open source as well. But there's also a service that you can use up to a certain limit, just sort of like how TwinGate is. And honestly, for anybody listening from a tail scale, I don't know if you even have a free tier because I haven't looked.

Because TwinGate has been good enough for me and I just haven't wanted to move off. So there's more options. So going back to your storyline here, as long as you have options, you're willing to let something drop in the case that what you were using ends up costing you more. You're not getting as much value out of it. Yeah. But that also brings me to the example you just said could invalidate everything I said so far.

you know, go to market, attract talent, and so on and so forth. In some cases, all those arguments are invalid and not the reasons why something is free. A perfectly valid argument could be competition. If your competition started giving a free tier service or free service up to a level and what's or not, then you need to do it as well to compete with them. Not for the reasons we talked about so far, but simply it's competition. This is...

Running software has relatively small, almost negligible cost, unlike producing physical goods. You have the possibility to give away something for free in a way to capture the market and kill the competition or force the competition to do the same. Because if there are, let's say there are 1,000 paid customers of Tailscale,

Now, their operational cost, I'm not talking about development, I'm not talking about R&D and so on and so forth. Their operational cost will not increase much if they double that with three-tier users or triple or even have 10 times more but small accounts. The operational cost is very similar, if not the same. It's never the same, but very, very similar. So...

It's free in terms that if you have both free and paid tier, the company does not need to invest much more to provide the paid tier. Assuming that R&D development and all that are happening anyways for the paying customers. I think now the one service that will never be able to do that for real is going to be your AI services, at least not in the near term.

Again, depends on the competition. I mean, yes, their operational costs are not going to be negligible, as I mentioned before, right? First of all, GPT is free. And I know that you're going to say, hey, you are paying for the service, but actually that cost is, what you're paying is not covering the costs. I can tell you that in advance. GPT itself could not sustain even a fraction of its costs through the paying users right now.

So it's almost like it's free. Free for consumer now, not for them, right? Well, that's my point is at some point as the company, you've got to break even or do another round or something, which is what we're seeing with these companies. Exactly. They will get another round of financing and they will get another round of financing because everybody's primarily using GPT.

For free. I mean, in this context, when I say for free or some small fee that is not covering the costs anyway, right? So those are very, very expensive things. So they're going for adoption in the same way that Amazon itself, I'm not sure today, but at least in the past, was losing money year after year just to get the adoption, get the market dominated. And GPT is going there, or at least that's the plan. Can we not talk about AI anymore?

You mentioned this. I know, but I'm just trying to... I'm telling myself as I'm talking. Control yourself. If I ever meet you in person, I'm going to install one of those things on your chair so that I can press a button and electrify you every time you mention the AI. That's not a bad idea. You know what? You could do that now. I could just let you in on my network across TwinGate. Exactly. No. Maybe I can use AI to find...

find the figure out when you're pronouncing the word AI, then he had electric. What's the word? electrifies you? Is there anything else we can talk about companies offering free services? Sometimes it's competitive. Sometimes? All right, let me ask this question. Is it ever out of their good goodness of their hearts? I mean, it must be sometimes actually, not often, right? Because services have cost.

It could be not a high cost, but it has a cost. If you're looking for goodness of our hearts, you will find it more in open source than services. Services almost never, right? Because if you want to be nice, you can give that something as free software, not free service, and let people take that operational cost on themselves.

That's basically what Facebook is doing with Lama, right? Here's a competing model to GPT. Now don't ask us to run it for you because that's a big cost. Here it is for free. It's open source or whatever it is. Open weights, not open source. We're not lawyers. Open weights. I don't even know what open weights is. Go look it up. Okay. Go look it up. You still won't understand it even after you look it up, but it's open weights. So what do you think?

Do you think companies should be giving away free services? Do you think they're nuts? Or do you really realize that when you're not paying for something, and even if you're paying for it, you're still the product? Head over to the Slack workspace, look in the podcast channel for episode number 286, and leave your comments there. We hope this episode was helpful to you.

If you want to discuss it or ask a question, please reach out to us. Our contact information and a link to the Slack workspace are at devopsparadox.com slash contact. If you subscribe through Apple Podcasts, be sure to leave us a review there. That helps other people discover this podcast. Go sign up right now at devopsparadox.com to receive an email whenever we drop the latest episode. Thank you for listening to DevOps Paradox.

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