Commoditize Your Complement: Why Companies Give Things Away

Here is a question worth sitting with. Why do large, profitable companies spend serious money building things and then give them away?

Free software that took years to write. Free maps. Free storage. Free tools that competitors charge for. This is not charity, and it is not usually a loss-leader in the ordinary sense of hoping you will buy the same thing later.

There is a clean piece of economics underneath it, and once you see it, a great deal of otherwise puzzling corporate behaviour becomes predictable.

The strategy has a name: commoditise your complement. Understanding it starts with understanding what a complement is.

Complements: the things people buy together

Two products are complements when buying one makes you more likely to buy the other. Cars and petrol. Phones and apps. Printers and ink. Coffee machines and coffee. Video game consoles and games.

The key property of complements is this: when one gets cheaper, demand for the other goes up.

That makes intuitive sense. If petrol suddenly cost half as much, more people would drive, and more people would buy cars. The car makers would benefit from a price cut they had nothing to do with, because buyers do not really evaluate a car in isolation — they evaluate the total cost of having a car, fuel included.

This is the mechanism the whole strategy rests on. Buyers judge the package. So anything that reduces the price of the other half of the package increases what they are willing to pay for your half.

Which suggests an obvious move. If you sell one half of a pair, you would very much like the other half to be cheap, plentiful, and interchangeable — in a word, commoditised. Not because you dislike the people selling it, but because every rupee taken out of their price is a rupee that can come to you.

The strategy in practice

Once you hold that idea, you can read a lot of corporate behaviour directly off it.

Give away software to sell hardware. A company that earns money on devices benefits when the software running on them is free and abundant. Funding free software is not generosity — it lowers the total cost of owning the device, which lets the device carry a higher price.

Give away hardware designs to sell services. The reverse works too. If your income comes from a service, cheap standardised hardware everywhere is excellent news, because it removes a barrier between customers and the thing you actually charge for.

Fund open standards. Standards make suppliers interchangeable. If you sell something that sits on top of a standard, you want that standard widely adopted and supplied by many competing vendors, none of whom can charge much.

Subsidise the input you depend on. A business whose growth is capped by the availability of some input often invests in expanding the supply of that input — including supply it does not own. Training people in a skill your industry needs makes that skill cheaper, which is inconvenient for the individuals but useful for the employers.

In each case the logic is the same: be the scarce, differentiated half of a pair, and work to make the other half abundant.

There is a defensive dimension too. A competitor who charges for something you provide free is in a difficult position — they are competing against zero, which is hard to undercut. So the strategy simultaneously grows your market and squeezes anyone whose business model sits in the complementary layer.

Reading it from the other side

The most useful thing this idea gives you is not a strategy to run. It is a lens for working out where you sit in someone else's plan.

Ask two questions about any business, including your own:

What is my product a complement to? If people buy your thing alongside something else, then whoever sells that something else has an interest in your price falling. They may act on it.

Is anyone working to commoditise me? If a large company suddenly starts giving away a version of what you sell, the question is not why they are being generous. It is what they sell that becomes more valuable when your product is free. That answer tells you what is actually happening and roughly how long it will continue.

This is a genuinely uncomfortable position to be in, and it is worth naming plainly: being the commoditised half of someone else's strategy is difficult, because you are competing against a price set by a company that does not need to profit from your layer at all.

The usual escapes are to move to a layer that is hard to commoditise — where switching costs, network effects, or genuine scarcity protect you — or to become the complement rather than the commodity, which usually means owning the customer relationship rather than the component.

The strategy also has natural limits worth knowing. It only works if the two things really are complements; making an unrelated product cheaper does nothing for you. And commoditising a complement is expensive, so it pays only when your half of the pair is genuinely defensible — otherwise you have funded a cheaper market that someone else will serve.

But the core observation is simple and durable: when something valuable is being given away, follow the pair. Somebody is selling the other half.