“To build up publicity and mindshare you have to give away value, but the same product often has a vastly different perceived value based on price point and how they got it. It is so hard to win market share by lowering price, but easy to win market share by increasing (real and perceived) value.”

Aaron’s point on market share was regarding a paid off-line product (a book in his case). Perceived value for paid products and services tends to be somewhat proportional to what you have to spend to achieve it.

As you know free + online is a very different beast. Check out Josh Kopelman on the Penny Gap: http://redeye.firstround.com/2007/03/the_first_penny.html