If executives at his unnamed targets— Facebook Inc. and Google parent Alphabet Inc. —rolled their eyes, you can understand why. Mr. Cook is, after all, talking his book: Apple makes its money by charging premium prices for its products. Google and Facebook make theirs by giving away their products and then selling ads.
Yet this is not just some internecine battle of billionaires. The zero-price business model is a source of many of the problems plaguing the Internet. It’s no coincidence that Google, Facebook and Twitter Inc. —which garner more than 80% of their revenue from advertising—are the ones most often accused of propagating toxic content and eroding privacy, while Microsoft Corp. and Apple, whose revenue comes from selling software, hardware and services, fly under the radar.
Think about why price matters: It’s how the market rations precious resources. A price signals to suppliers how much to invest in a product. It’s how a consumer decides whether that product is the best use of her budget.
A price of zero cripples that rationing role. When it comes to generating volume, free is a dream; when it comes to quality control, it’s a nightmare.