I originally posted this as a comment under the 37 signals blog post How did the web lose faith in charging for stuff.
If you don’t have something of real worth, or aren’t willing to work hard to get your customers, or don’t have the skill to compete head to head in the market, then by all means charge for your software. There are always a few suckers out there to think Y costs more than X so it must be better. Your hobby project will probably net you a few dollars to buy candy after school or if you save it up, some little gizmo that has a light that blinks when you push a button.
Look at who’s talking here — 37 signals exists only because of free stuff. I can count the number of paying users they have on one hand (but only because I have six fingers on my right hand.) All of their money comes from consulting, because they invented two things and gave them away for free — rounded corners, and Rails. It is their reputation from giving away stuff that gets them clients.
Google controls advertising, so if you have viewers, you have value to Google. TV existed solely on advertising, and radio, magazines, and newspapers before it. So can the internet. The token subscriptions for print until recently only ever covered shipping. There is no shipping cost on the internet. If your application is 2 gigabytes, by all means charge a 4 cent download fee. But your competitors are going to laugh at you and pay 4 cents to everyone on the planet (that’s only $240 million) for the advertizing.
Free software *IS* advertising. And it’s better than a flash banner video clip with a wack-a-mole celebrity endorsement for herbal viagra delivered to your front door every morning by a spokesmodel. Because only people interested in your product will download it for free. And if they like it, they’ll tell all their friends. Or keep it secret and build a business model to monetize what you’re giving away. But then they’ll probably hire you as a consultant to improve it.