"We lose money on each transaction, but make it up on volume."
The success of Google in actually making it up on volume has apparently spurred legions of companies - and their venture capital investors - to try offering free services. In particular, this is another example of upstart tech services sucking high-margins away from incumbents.
But will it do anything other than convincing consumers that the best things in life are free?
For 800Free411, the gamble seems to be that the captive,valuable audience will drive high advertising rates and that volume will drive down per-call interconnect fees to the carriers' wireless network. FuturePhone will need to pick - or offer consumers a choice - between a subscription model or an ad-supported model. In either case, volume will need to drive down FuturePhone's even more expensive interconnect fees with both wireless carriers and fixed line owners.