The tech world is an interesting one when it comes to companies making money. Some at the top like Microsoft, Apple and Google are raking in billions in profits every year. And each of those do it with different models: Microsoft through software, Apple through hardware and Google through advertising. But at the other end of the spectrum, most startups, even the very popular ones, haven’t yet figured out how to make money beyond their costs.
While the advertising-based model is working for a select few, for most, it’s simply not proving to be a very good stand-alone model. Pandora is one of the companies that web-based advertising is actually working pretty well for. But even they’re not expecting to turn a profit until next year — and that’s based on projections. I bring them up because they recently decided to move forward with a freemium model in a serious way for the first time last week. As a large service with a rabid fan-base, this seems like a brilliant move. And I wonder if the time isn’t right for more services to try this?
The freemium model is hardly a new idea. VC Fred Wilson has been talking about it since 2006 — though the name came a little later — but the model was around well before that also. The idea that you have a core set of features that are free to all users, and charge a fee to the smaller subset of users who will want more advanced features, makes a lot of sense. But now it’s easier than it has ever been for startups of all sizes to be able to take payments for such a structure, thanks to a number of companies and new platforms, like app stores. And there are plenty of startups popping up around this space to further help with this, like the soon-to-launch Contenture.
But I think for the freemium model to work in today’s environment, it has be along the lines of the opening paragraph of Wilson’s post in 2006:
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.
Rather than launching a service with a freemium model, I think it’s important to gain a large and passionate user-base first. That’s exactly why I think the model will work very well for Pandora. And that’s the same reason why it would work for Twitter, if it ever decides to go that route. Jason Calacanis has been talking about his desire to pay for premium features on Twitter since 2007. And plenty of others have since brought up the idea.
As part of its bid to make money, Twitter is said to be launching premium tools by the end of this year. But that would apparently be for businesses — I think a lot of personal users would be just as willing to pay at this point. I know I would. And that got me thinking: What services would I pay for?
I’ll start with the ones I already pay for:
- Pandora. An easy choice for me. For $36-a-year, they remove all advertising, give you better quality music and a nice desktop app among other things. I paid for it immediately.
- Flickr. Another site that was a no-brainer for me. At $24.95-a-year, you get unlimited storage space for all your photos online. I’ve been a happy member for a few years now.
- Tweetie. An interesting one in that it’s a Twitter client. You have to pay for the iPhone app, but there’s also the new desktop app which offers a free ad-supported version, or a paid ($19.95 one-time fee) version minus the ads. Twitterrific, another Twitter client, has a similar model, but also has a free version of its iPhone app, alongside its paid version.
And here are some ones would I pay for:
- Twitter. While I’m already paying for some Twitter clients, I would gladly pay something between $25-$50 a year for a more robust version of the actual Twitter site if it included things like power-searching, analytics and filters.
- Facebook. Unlike the very simple Twitter, I think Facebook is already too complicated, so I wouldn’t really want or need any more features. But if it ever came down to it and Facebook really needed to make money and started shutting off features (which would raise a shitstorm like no other among its users), I would gladly pay to keep some of them intact. Again, probably in the $25-$50 a year range.
- FriendFeed. I would gladly pay a lesser fee, maybe $10 to $20 a year to use FriendFeed — especially if they gave me something like an iPhone app.
- Gmail. At some point soon, I likely will be paying to use Gmail, as I’m almost out of my free storage space. 10 GB is $20 a year, a bit high, I think, but I’d pay it.
- Digg. I’d pay to user Digg particularly if I get could easy ways to view more interesting data that they have, and the ability to sort and filter to see what other “Pro” users do. Digg’s comments are quite often absolutely ridiculous, but I think could actually be useful if I could only see ones by users who care enough to pay for the service, rather than trolls. I’d pay about $10-$15 a year for Digg.
- YouTube. Same as Digg, I’d pay to use YouTube to see only comments by other “Pro” users. And I’d pay for higher quality, longer uploads and a goddamn nicer player than that cheesy big-button box. I’d probably pay up for $30 a year if I could use YouTube to store long, HD videos.
- Instapaper. This is the service I use to bookmark nearly everything I want to read on the web. It’s very bare-bones, which is one of the reasons that I like it, but I would certainly pay a fee to add search and some other advanced options. I would probably pay like $10 a year to use this. Interestingly enough, like the Twitter clients, Instapaper does have a free and pay version of an iPhone app.
Those are just the ones I would personally be willing to pay for. I’m sure everyone else will have their own list that they would pay for as well. And that’s why the freemium model is so great — it gives users the options to pay for only the services they use the most. And for certain really popular services, I think this could be huge. Pandora CTO Tom Conrad told me last week that he expects only 3-5% of Pandora’s users to sign up for its premium version, but I wouldn’t be surprised if it goes higher than that — especially if Pandora adds more features to the service over time.
One of the keys to this in my mind is the yearly fee. While it might look nice to offer a service for $3-a-month, that recurring charge is ugly. I’d much rather pay a still low $36-a-year and not have to worry about it after that. And let’s add it up. Even if I paid for all of the services I listed above, depending on where the prices fall in the ranges I gave, it’s only $200 – $250 a year. That’s for 10 services, that I love and use every day.
Think about it this way: Before I was able to move away form the colossal rip-off that is Comcast cable, my cable bill was nearly $200 — a month! How people pay companies like Comcast over $2,000 a year for mediocre content and shit service is beyond me. I would rather pay a bunch of hard working start-ups (and yes some bigger services like YouTube — owned by Google — and Flickr — owned by Yahoo) all that money. And I wouldn’t even have to, under the rates I outlined above, I would be paying them just about 10% of that!
The freemium model doesn’t always work. It didn’t for Pownce, for example. But to go back to what I said earlier, getting the users is they key to this. If you can get a ton of them, and get a certain percentage to be very loyal, they’re more than likely going to be willing to pay. And while it may not be enough for every company to only use that model, it at the very least would be a nice compliment to the ad-based model.
And, as I hinted at above, there are other ways to look at this now. With the rise of mobile app stores, it’s becoming a decent business model to have a service that has a pay app. This has worked for the aforementioned Tweetie. An app can be a very simple advanced feature under this freemium model, and extends the possibilities for the model.
But back to the web, just imagine if Facebook has a few percent of its users paying each year. They have over 200 million users, so say just 5% paid. That’s 10 million people paying, let’s say, $30 a year. That’s $300 million — or in other words, nearly its entire projected revenue for this year. If it were able to get 10% to pay, it’s be more than it’s projected revenue. Of course, Facebook isn’t likely to use that model, instead it will focus on micro-transactions and other means of making money — but still, it’s worth thinking about.
There are quite a lot of services out there that I would pay to use, but they won’t let me. Maybe they should.
[photo: flickr/striatic]
Twibeo is a twitter-like service that lets users go beyond the 140 character limit and enter a new microblogging world that lets you say what you are doing using text, photos and yes- even video.
http://www.twibeo.com
So it’s a blogging platform?
Wow, things really do go round in a circle…
I’ve got to say, postings like these from Andrew Stark are nothing but irritating! I urge everyone not to follow the link… and never use the service. Keep the comments on point… or slither back into the to direct mail marketing hole you crawled out of.
The internet today: lots of ideas without much innovation… tons of time wasters and very few time savers.
Tom is right when he says, “the issue that the vast majority of ‘businesses’ neglect is figuring out up front, how the hell are we going to generate revenue.
Maybe kids with cash and no family to support or mortgages to pay will bite on a bunch of useless subscriptions, but companies who try to survive in that world are destined to dive into the dead pool.
You guys want a page that really pays it forward.
http://www.bueno.com go look for yourself it really gives you something worth money.Just a quik note for me to pay it forward.
Twibeo is a twitter-like service that lets thousands of users to go beyond the 140 character limit and enter a new microblogging world that lets you say what you are doing using text, photos and yes- even video.
http://www.twibeo.com
you said that already, jackass.
Twibeo is a twitter-like service that lets thousands of people go beyond the 140 character limit and enter a new microblogging world that lets you say what you are doing using text, photos and yes- even video.
http://www.twibeo.com
oh ffs, will you just piss off?
Advertising will work they just need to wait until newspapers go out of business. Hang on till then as of will end print advertising and legitimize online more than it is now.
Couldn’t agree more. Advertising has actually already migrated onto the online world.
There still are people and businesses in almost all the countries who would prefer offline advertisement over online ones
OK, I give up: how do you know when “newspapers” have gone out of business?
your newspaper will also stop appearing in your local store, alternatively you could check online
Yes online advertising will increase when that happens but that’s not going to be for several years if that soon.
MG:
Nice article. I couldn’t agree with you more about the freemium model. As a user I believe when you launch a service with premium upgrade options it cheapens the services. It makes it feel like the company owners are being stingy and undermining the free services just enough to make you pay. Yet when there’s already a passionate user base around and premium services are added, it has a much more positive feel as if they are offering a bonus for users.
Twibeo is a site that allows thousands of people to go beyond the 140 character limit and let’s users say what they are doing using photos, text and even videos.
http://www.twibeo.com
Wow, I am tempted now to start an anti-Twibeo campaign now due to your spamming.
I think they have close ties to TC. Thus no real warnings from TC.
You must have a lot of disposable income that you don’t need then. Most people are thinking about spending LESS money, not micro-paying themselves to death. Try giving your extra cash to charities, or better yet, me.
Maybe you’d have more disposable income if you weren’t so greedy.
I’m with Herne on this one. I don’t see people embracing all of these subscription charges. Most consumers are already suffering from “subscription fatigue.” Ad and Freemium models will both have their place but free will always win… especially when the economy is hurting.
You’re spot on with this MG. I’ve been thinking about it ever since the last time I renewed my Flickr membership. They’re offering such a great value for what’s basically the cost of a DVD, it makes me wonder why more companies aren’t following suit.
Create a compelling free product, and the premium features will be an easy sell. I’d list Evernote as another company that’s doing this well. I also can’t wait to see if Hulu ever implements anything along these lines (though the networks may never let that happen).
I know. I think that’s the key. In the big picture, these costs are SO little — less than your cable every month for several things. I think there needs to be a sea change.
i’ll pay for a full fledged twitter man.
I don’t pay for any online services, nor do i have any intention to do so..for photos I have Facebook (I would never pay for any facebook features), Twitter there’s a gazillion free apps, and the free Pandora is as good as anything else.
Pay for Digg? Seriously?
I think the point is that many people would pay for services that they deem useful. I wouldn’t pay for Digg or Facebook either–but for Reddit or Twitter? In a heartbeat.
And if you don’t want to pay for anything, that’s always an option too
Right, exactly.
This post is a bit unnecessary. These big boys are smart enough to know what service they can charge. They are also smart enough to do some market research. And techcrunch writer is not necessarily an average consumer.
I don´t think so. Working for some of the big ships and they truly still struggling around believe me. Sometimes it seems to be just still a “build and try methodology” that sometimes or hopefully will pay off. The problem is that using the internet has always been free except the access itself and data charges.
So you will need to turn the users mind from their “all for free” spirit and that´s the nut to crack in my mind.
I’d pay for Hulu if it meant I could watch Family Guy a couple hours after it airs.
Amen… I’d pay for Hulu if my 2 week old Family Guy wasn’t interrupted by African orphans every 10 min.
I’d pay for Hulu if they had newer movies.
I’d pay for Hulu if they provide access from my country.
I would pay for Hulu if;
1. Removed ads for paying customers
2. Offered more reliable HD streams for paying customers.
3. More content that didn’t expire and was released right after it aired, not a week later.
4. Had an offline, google gears, feature for my queue.
Why not as soon as it airs?
Why not before it airs!?!?!
This will definitely happen for Twitter, as soon as they’re bought by someone. Depending on the rumors, it may or may not be something I’m willing to pay for. Twitter seems to be the glue holding the rest of the ‘net together right now, and if that folds, It’s not quite clear that we can go back to either of the previous models of large social networks that have gained popularity….
Twitter is the glue holdin’ the net together? What does that even mean? It’s just an overhyped, unprofitable startup – you’re post makes it sound likes it’s already destroyed Facebook.
MG, this certainly feels like the wave of the future. I’m testing the waters with an online guidebook freemium model and so far, so good. It’s earning me more than I’d see in royalties from a print version during the same time period!
You’d probably do even better if you promoted your subscription service with more than a tiny button, and some sample content once you follow a link. Good luck.
I’m all for these sites charging membership fees.
The more of these websites that start charging fees, the more we can regress to the year 1998 and the real high times of the internet, when everything used to cost money.
That’s what got all those VCs to pour money into web projects. When all these leech services came out and pulled the dollars away and turned people into massive freeloaders crying at every site that charged them something.
That was when online investments started to really die.
I think Facebook, MySpace, and others should really do an about face and betray their users once and for all in a definitive move to re-monetize the web.
Once one of them does it successfully, the others will fall like dominos. Advertising is working less and less, so this is really what needs to be done.
Rip the bandaid off.
Advertising is alive and well on the Web and it will continue to be the major source of income. Google is the most profitable web site and it advertises.
People will always put up with advertising (think TV). Advertising is not all bad, it’s useful to know what promotion and new products companies are advertising. It’s in our culture and we learned to tune it out for the most part.
Some free sites are kicking butt. PlentyOfFish.com (a free site) is more popular and some say works better that eHarmony or Match.com
Free sites may be the future and advertising will always be on the Web.
Exactly. If advertisement will be able to address users needs in the specific context finally instead creating just random emotions.
Case and point of one I paid for. MSN Hotmail Plus! I wanted my hotmail to be usable on outlook and it gave me extra space and no ads too. Then storage increased, but could still used the outlook. I paid $30 a year just to use outlook. Once they got rid of that and only offered with live mail client I cancelled my service and never looked back. Hi gmail
you would pay for those me and the majority wouldnt
I think on the web the 80/20 rule works perfectly…
Give 80% of your service, content, etc… away for free and pocket what’s left (20%). In other words, 80% is the regular content and 20% is the premium version of you service… You can’t just put a crappy website online and load it with tons of ads… Build something with value that your users will love… Then and only then people will feel the need to pay for the extras and benefits that your service is offering…
Very nice post !
Which 20%?
I certainly agree about Pandora. I have happily paid the fee for two years now. It’s an excellent service and worth the money. I also pay for Sirius in my car, but if I could somehow replace it with Pandora, I’d pay for that as well.
I would bet something like that is coming.
Web applications will follow the Cable TV model. When you sign up for Cable TV, you get a bunch of stations and they all show commercials. You can then pay for channels that do not show commercials.
The Web follows that model. When you buy an Internet connection, you get access to Web sites that offer free content (Yahoo, Google, Wikipedia). You can also pay for access to a Web application, like Match.com. Match.com will not show ads, just like the premium cable channels.
Most pundits agree that the newspaper business will die because of the Web. But Cable TV will eventually give up most of it’s market to the Asynchronous, on demand nature of the Web
As Silicon Valley Dropout points out, no one in their right mind would pay for any of the services listed above, sans Flickr – but even that niche group isn’t enough to please the Street.
The reality is that while it’s great to get the latest Valley news here (or elsewhere) the early adopter die hard groups are the only ones who might pay for extras. The reality is that until most of the aforementioned services hit critical mass and solve a problem (e.g. Photoshop is too expensive AND my hard drive is overloaded with pics = Flickr) there is no way the casual web user would pay for it. Additionally, everything else you mentioned, sans Gmail, is replaceable. I mean, why in the hell would anyone pay for Digg? I can go to TechMeme and a few other sources to get those stories.
At any rate, the concept of freemium is great and but to date has only been applicable to startups.
free is the way to go!
Nothing is free. If it seems free to you as a consumer you pay with something else. Your privacy, you personal information, buying a product in the many ads you get up your face. Products that you pay for usually are of more value and of higher quality, so drop that free religious movement, please
Well said. Though users may like things being free, and thus will flock to sites that offer a free service, that doesn’t mean those sites will make any money. Facebook will whore your personal details to any marketers, paying for news allows news outlets to perform actual investigative journalism and not just copy paste press releases…
Counter example – Wikipedia. It seems to be really free and you don’t pay with something else. Eh?
We’ll see how Pandora One does as a test of this.
I think another model that could work online is one based on commissions.
If you have a blog about BMWs and I want to sell mine but can’t find a buyer, I would love to be able to put a small ad on your site for my BMW and then pay you a commission if one of your readers buys it.
If a company like Google could come along and create a system that would help verify the sale and make it easy for the money to change hands, a lot of people could probably make a lot of money.
http://develope...com/common/api/
you may not have seen this.
Adding another layer on top where the auction holder agrees to pay the advertiser wouldn’t be that hard.
I dunno if it’s against the terms or not, but eBay’s API has been around for years, so I would think that somebody already thought of this.
Not a great idea if you ask me.
I hadn’t seen that. I wonder if that has been tried before.
It may not work, but it sure seems to me like people would be willing to pay more for results (commissions) than less for a chance at getting results (click-through ads).
Wow cool. I am not big enough to NEED it but that is cool, indeed.
I will be filing a landmine, oops, landmark patent this Monday(efile) on an application which monetizes services like Twitter. In fact the proof of concept mobile applications I built use the Twitter http API.
Drawing claim diagrams is fun and rewarding.
One of the very best ways to monetize on a web service is to think of a really good idea, like Friendster did, then patent it.
United States Patent 7,069,308
“System, method and apparatus for connecting users in an online computer system based on their relationships within social networks ”
Or Amazon’s one click patent which blocked all sites from implement one click ecommerce for years.
That’s probably the very best way to monetize on the web because it wards off would be cloners. Or at least makes them pay huge fees. IP registration stopped scrabulous and friends.
My new patent application should be a winner and a stick in Google’s eye.
Software patents are evil.
(at the risk of being labeled Captain Obvious)
make sure you file this patent before your unemployment benefits run out..LOL
like adsense pay-per-action?
(Don’t even bother thinking about patenting this one …
http://adwords....-beta-test.html
I am sorry but I am a bit bitter about software patents.)
I find it beyond humorous that you would pay for services that most people won’t be using in 2 years for free…
Digg? Are you serious? If you paid me $36 a year I wouldn’t use it…
Do you honestly think Facebook et al hasn’t thought of charging in some capacity? Obviously they know what most do, nobody would pay and/or it would completely ruin the user experience
Obviously they have thought about it — but as I said they won’t. But I don’t think that idea should be off the table.
1. Facebook does what MG said and offers two tiers.
2. Facebook goes paid-only.
I, for one, would not pay a dime to facebook as long as I can use a crippled version for free. I cannot leave completely because my friends are there.
Oh and if they shut off non-paying people, most of my friends won’t be there either. Problem solved. Next question …
Turning Facebook into Friends Reunited, great idea …
This isn’t directly related, but I just tried the new skype iPhone application and it rocks.
I am closing my vonage unlimited world account tonight. Vonage was charging me about $40 including tax to call China and Europe unlimited from the USA and skype is only $12.95 + $4 per month for a phone number.
I had tried the G1 skype application and all it did was call a “local number” then hang up because it was a bad number or something. The iPhone skype app actually works with wifi and does not try to call a bad local number to route your call. It literally routes your call through wifi as you would expect it to.
Since I make so many calls internationally I will have to ditch my G1 now and use my QuickPwn’d iPhone at work and on trips.
Next time I go to asia I can now call home for free with my iPhone. No SIM card required, all you have to do is find an open wifi network. Last time I popped a people’s SIM card from a 7 Eleven in hong kong airport I had bought with an octopus card, but it cost a lot to call the USA.
I wish Skype would make the Android version as good as the iPhone. I hate the iPhone and now I have to use it instead of my G1 with T-Mobile hacked because of Skype.
Please Skype fix your pathetic broken Android app.
Chris,
When using the Skype app on the G1, make sure you’re entering a + before the country code when dialing (and when telling the app your own phone number); otherwise, it will not work correctly. You should hold down the 0 button to get the + sign to show up.
Hope this helps.
How exactly were you able to move away from your Comcast bill ? I live in the Bay Area and would like to do just that… But unfortunately there does not seem to be any alternatives (except AT&T DSL which is slow and not that cheap…). I am currently in France and cannot believe how cheap it is over here
You wouldn’t pay – your company would pay. LOL at the prospect of asking Digg users to pay, or anyone thinking that paying for Digg analysis might have value – have you actually been reading or is your attention span totally shot?
A lot of browser based MMO games are like this. I pay a lot of money for Travian, even though their game works perfectly fine without the premium features…
Then why pay?
Is freemium like shareware? It seems very similar – an app you can use for free, but upgrade if you want more. Maybe from a marketing prospective it is different. I guess there is a differentiation between demo-style, a sample of the program, and a stand-alone program that fully functions alone but can have paid advanced features.
I’m curious about the economic rational behind those subtle differences.
I think we are more talking about services here (or software repackaged as services).
“I would pay for advanced search.” Sounds desperate to me. Seems like you’re trying to say: “Just let me give you money!”
Recurring donation is the way forward. Research shows that giving makes people feel good. I would love to help pay for some of the stuff I consume on the web (in particular, quality news, but not only). And I don’t need special “premium” gimmicks in return.
Let us give. Make it easy, make it recurring, say thanks. Call it “premium” if you like, as a figleaf. Or maybe just be honest and call it “supporter”.
Yes indeed. The costs of advising these days can cost you a small stack of cash. I look for to the days when these corporate giants give us all a fair go.
I’ve got serious issues with Flickr. I was a pro member for a couple of years, uploaded lots of pictures. Moved to free as Facebook photos took over as my primary photo site. Now only a few of my photos can be viewed. Feels like they are holding them hostage. I’m just going to dump the account and move everything to facebook, where I’ve made my profile public.
$24.99 just re-up already. We both know you’re going to.
Michael, facebook? seriously? It resizes every picture to 640, if I recall correctly.
Why would you buy a high megapixel point and shoot camera anymore?
I agree that good things are worth paying for – but only if they are really good, and come with full support.
There are very few Web-things that I am paying for, but for these I am happy to pay.
I think the best value for money I am getting is my Yahoo Mail account, with all the other services that come with it. At about $20 a year it gives me all the email capabilities I might need, unlimited storage and the confidence of good service.
MG, do you realize that all these costs add up? and most people don’t get paid to research and analyze new technologies like you do? …
I am pretty sure people will only pay for three to five of the services that they think they absolutely need. Will that cause companies to come up with more competitive messages? Suddenly, flickr is not just competing with Photobucket but with Pandora, for revenue.
In the end, perhaps this has always been the case. I just realized it when I was reading this article. Thanks.
Why the “Pay It Forward” cover picture? From what I can see it has nothing to do with this article other than the word “Pay”.
Random.
thats the point
I’ve recently paid for my Last.FM subscription. Although, being based in Europe, I didn’t really had another choice (there are no quality alternatives), I didn’t mind. It’s only $3 a month and I get a nice player out of it.
Other services I would pay for:
- Gmail / Google Apps (can’t live without it)
- Youtube (long HD uploads, I like it!)
- Flickr (unlimited storage, yeah!)
Unlike Twitter/Digg/etc, the services above actually give me something valuable. Their functions has become a tool rather than just entertainment. I can actually do or create something with it.
Did you ever think about using Nambu as your FriendFeed Client on the iPhone. It is for free up to now, but I think they will accept your donation.
if people are not willing to pay for services then it’s because they don’t value the services enough. it’s as simple as that.
If it has value, people will pay
Most definitely. I run an online service for pro photographers and my customers see the value in the service… and pay the sign up plus monthly charges. I was profitable in the first month of operation. And there are several other companies like mine where people are paying.
But it is going to take more time for a greater number of people to get used to the idea of paying for online services and applications. We’re all so used to getting things for free.
one of the more scalable versions of freemium is the “user pay” model in social gaming services. the games are free to play, but to “power up” in the game many users, but certainly not all of them, choose to make micropayments.
i wonder if this model can be applied to web services. tumblr is an interesting case in point. they have launched a feature called tumbularity. it’s effectively your blogging score. if tumblr incorporates more game like elements into the service, then its possible that a user pay model could emerge.
this is all a bit speculative at this point, but it’s worth thinking about.
I was about to make that comment: Facebook has incorporated micro-transactions around virtual goods, primarily gifts for now. They could also charge for higher quality pictures, additional capacity, etc.
Users will pay for convenience, higher quality, more capacity, etc. for services that they really care about. I used Flickr for free for a long time when I was only uploading pics taken with my phone, and started paying when I got my latest digital camera.
The problem for all these services is that the average conversion ratio of 2 to 5% of users is not enough to cover their operating costs.
Other services, SmugMug always being the reference for me, but you could add World of Warcraft, have firmly stated that you would need to pay to use their product – even if there are free alternatives out there, BUT not as good – and they have craptons of user paying respectively $49 (?) and $200+ a year.
it’s all psychological. You yell freemium, everybody says, “Huh? What?” You yell no-pay-no-play right from day one and a few solid years from now, we’ve got a panic on our hands on the Fourth of July.
I have to say that this is more sign of the times then a firm direction. The reason for seeing more Freemium tendency among once free sites it that ads are making just short of what they made a few years back making them as an unstable source of income, which is what news papers got adjusted for and stabilized.
But for vendors of services it is easier to charge money for the premium account and not lose clients.
I fear the service providers charging money the fear is that user will go to the alternative services.
If flickr would charged you with 25$ to use flickr with all of its abilities you will not see flickr as it is big today. and i think that fear will not make facebook move to the freemium realm either.
In my encounter with a vendor that went to the full services i have gone bust on him and let him go (read more
http://www.yuva...r-all-the-fish/)
But i assume if he would go with commercials i would have upgraded.
So my 10c to the chat is that i see it better to go freemium then go total.
that you can alternatively acquire some where else
@parislemon are you familiar with XING? (They bought my previous company, socialmedian). XING has 600K paying members who pay 5 euro/month. 40% EBITDA margins. 600k pay out of 7.5M total members. The model does exist.
some of the things you say you’d pay for, i wonder how many “normal” people would pay for? pro comments on youtube/digg, that market has to be minute?
I think there is probably a difference to things that people will pay for, ie storage on things like gmail. that is a common sense thing that people would be prepared to pay for if they need to. Premium content, people are prepared to pay for dvds, computer games etc, so online probably no different. Things like twitter/facebook that they expect to be free, i wonder how many people would pay, other than those that are obcesseed. although i guess facebook is so intertined with so many people that they could make that a subscription service and current users probably wouldnt have much choice other than, pay.
I wrote a similar post about a month ago. I posted my Top 5 things I would pay for on the web here
http://wordspic...sweb.com/?p=269
It’s interesting. Even in this column, there’s not a lot you’d be willing to pay for. I mean, think about how much stuff you do on the web, and then compare that to what you say you will pay for.
Great thinking guys. Offer Freemium Services during one of the worst ever Credit Crunch years.
At least a decade ago there was certain Web Services you had to pay for – and one of those was Email Storage.
But then GMail came along and totally killed off that line of key revenue for many Web Companies.
Around that time too, Google launched Googlebase which went straight at the heart of Ebay’s business model, by offering free listings and auctioning deals.
Then only recently Google set up their Second Life killer called Lively, which gladly went dead.
Google has a pattern of going after competitors or revenue rivals, by stepping on their online toes and offering Advertising instead of ‘Paid Services’.
This is why Google shall remain the dominant Web Company for many years to come as FreeAd Web Services from Google will also win against their poor Freemium cousins.
Don’t forget Analytics, Google Apps, Google Docs, Google Maps and Reader.
Also Google adwords Keyword tool
You haven’t named any games services or games in the services you pay for or would potentially pay for.
A glaring omission, a personal viewpoint, or are you just covering storage and comms apps and services?
In any case, games services have had the “…there are quite a lot of services out there that I would pay to use, but they won’t let me…” side covered off for years and certain web services could learn a lot from them.
Dom
I wouldn’t pay at all personally. Freemium only works if you give value. If Facebook charges then I find the next one. I have toyed with certain freemium models on http://www.worstpizza.com and so far have abandoned them.
Out of these, I would love to pay for Gmail.
except that the problem for most start-ups is getting this ‘huge user base’ a la Twitter & FB –the exceptional, top level ones.
Charging monthly fee actually (I believe) costs more as most c.cards take a per transaction fee base + % of the sale. So every $3 transaction creates 12 transaction fees whereas an annual $36 charge is only 1 transaction- can add up.
I would hold on to these services. Develop them, perfect them, put them in beta and test them, make them scalable and create a fast rollout strategy for when the economy turns. Rgds Vince
Unfortunately,
What this article/thread gets to is that the vast majority of web apps, don’t start out with a feasible approach to generating revenue.
There’s no one way for a given software/web business to generate revenue. Paid for services might work for some, advertising for others, subscription for still another group, etc..
However, the issue that the vast majority of ‘businesses’ neglect is figuring out up front, how the hell are we going to generate revenue. And I suspect that’s because that’s a bitch of a question to answer. The issue of generating revs is one that requires that you actually identify who your targeted customers might be, and who is going to actually pay for the product/service you’re going to be creating.
This requires really asking the people/businesses who might write checks for your ‘product’ whether they’re really willing to pay for your service.. And let’s be real, most web apps are run by people who aren’t going to try to do this, at least not upfront. It’s incredibly tough to ask a bunch of people upfront whether or not they would buy/pay for your intended product, and to try to get real world data to support your business propsition.
And that’s why you get to where you are now, with a great deal of companies still floundering trying to figure out how to generate revenue…
Learn how to run a business people, it’s not that hard!
Or, you can keep running ‘projects’ and claiming that they’re businesses…
Oh, MG, while you’re willing to pay for some premium services, and while there are others.. I’m convinced, based upon my research/conversations/background, that there will be far fewer people willing to pay for services that are essentially extras to a person’s life.
The reason the vast majority of software companies are focused on business, is because that’s where the money is!
And yeah, entertainment software apps have proven to be somewhat successful, but here again, if you’re going to attempt to create a startup/new app/game, and you want to generate revs, you’d better damn well do your homework to figure out hpw/why your targeted customer is going to pay for your app!
Social networks could stay free if they would improve their advertising models. The problem with advertising supporting these websites has been that the users pay very little attention to the ads. Click-thru rates are low because users get irritated by advertising models that continue to feel intrusive.
If the social networking websites want a model where the users embrace the advertising, they’ll have to find a way to engage & reward them for their actions. We all know that social networks thrive on user participation. Shouldn’t the advertising model be based on that principle, too? When you think of it along those lines, it’s no surprise that display ads don’t work.
When I go to a social network, I’m there to interact with my friends and family. Ads shown on the side of the page won’t get my attention (even if they are targeted to my interests or demographics) because I’m not interested in any type of advertising. My focus at that time is on my family and friends.
I understand and appreciate the success of search engine advertising. In that model, ads are clicked because they’re delivered when the user is searching for them. That makes sense because the ads are relevant to the user’s action. However, the current advertising model in social networks completely contradicts the fundamental reason why people go to social networks in the first place. Social networks are about participation — people go to share and receive information from friends and family. Since the current advertising model doesn’t engage the users and get them to participate willingly, it continues to perform with poor results.
We’ve come up with a new way to advertise on social networks. Our platform, which is called uVizz, makes users stakeholders in the advertising process. They’re engaged and rewarded for their roles in ad creation and delivery. Take a look at http://www.uVizz.com . We’ll be launching on Facebook, Twitter, Bebo, and Friendster on June 15, 2009.
Matt Johnson
uVizz