Writing for free isn't what it's all cracked up to be in the electronic book universe. I think this is something that works really well in the physical print world and people just assume the same concept applies.
Before anyone accuses me of blowing hot air, I do actually have experience with both fields. As most of you know, my "real job" is in the field of music. This includes doing freelance writing for music magazines. While I now get paid for this freelance work, it took me almost a year and a half of writing for free before I could get to that point. Why? Widely distributed magazines want to ensure quality by only using freelance writers with previously published articles. The best way to break into this vicious circle is to write for free. Sure, you didn't make any money but you do become published.
So when it comes to things like magazines, free gets you places. That's because when you finally look for the paid jobs, you are submitting yourself to the editor. They're looking at what kind of work you have done.
Ebooks are different. It's not the one on one of author and editor. It's 5 million authors vs. the 1 reader. The matter gets even more complicated when you just look at the sheer amount of information available on the internet. It's staggering. People will download whole hard drives of music that they have no intention of listening to simply because they can.
I have six different flash fiction stories up for free on Smashwords. They've all had well over 100 downloads each. But that doesn't necessarily translate into readers. People will download them just because they're free. Do they actually read them? Maybe.
With ebooks, free has its uses. There's a chance someone could actually download and read your stuff. If nothing else, it helps to increase the likelihood of someone seeing your name. But the chance of all of that leading to a quality reader (aka paying customer) is slim at best. Free means the author is trying to go to them. In some ways, it diminishes the quality of work. Ideally, the reader should go to the author.