The idea that free is a business model. Free is not a business model, it’s a tactic. It can be a very powerful tactic in the right hands–and with the right business model. I’d love to see more startups come out saying “our web app is so good… we’re going to charge you for it. That’s our monetization strategy.” I’d love to see more web apps worth paying for too.
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About Anne
Anne Truitt Zelenka is a writer, web technologist, and blogger. She is the author of Connect! A Guide to a New Way of Working. She blogs about technology and the social web at Togetherism and writes about family at The Everyday Cafe. Read more about Anne.
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6 Comments
note that the line “our web app is so good… we’re going to charge you for it. That’s our monetization strategy” is pretty much exactly what 37signals says.
I think there’s also a perceived “greater value” when you charge. Initially our site was simply a free message board and chatroom. People wanted more, and we offered more–at a price, because it wasn’t free for us to produce/host, and we wanted to stay advert free. While there was some huffiness and outcry when we moved to for-fee services, we actually grew tenfold. Not to mention, many of our members feel that the fee implies the seriousness of intent of other community members within, thus keeping out the “riff-raff.” I don’t think we’re the best at what we do (yet!) but we filled a niche. I feel our customers get serious bang for their buck and we certainly hope to knock their socks off in the future once we’re able to launch a list of most-requested features over a new sleeker architecture.
I think monetizing one’s app is a sound strategy; your livelihood depends upon the happiness of your customers, not the fancy of advertizers or investors, or what have you. We’re not rich by any means, but we broke even our first year and don’t owe anyone a dime.
Anne,
I think you’ve really captured something here. An exchange of money implies a contract with associated responsibilities on both parties. Providing a free service, especially a free beta, can be a support cop-out. As we have all experienced, 90% or more of the life cycle cost for an IT product/service relates to its maintenance and support. Free often seems to absolve the provider of that cost and thus limits the real value to the customer.
It also occurs to me that providing something for free releases a provider from any liability, from claims of fraud, and from any commitment to the installed base. Hmmm …. I would love to see a succinct analysis of the business case for “Free or Fee”.
Anne, thanks for all of the work this reflects.
I may be riff-raff, but you haven’t run me off yet!
Agreed on the “free” thing, though. And there’s nothing wrong with advertising. “Free” newspapers and TV have used it effectively for years. People don’t seem to be turning off the TVs…
Keep up the good work!
Dan
Hey Dan, did I call someone riff-raff? It sounds like something I would say though I try to squelch such urges…
Right, nothing wrong with advertising though it can be annoying sometimes. It’s definitely a decent business model but you can’t get away with offering crappy stuff and hope that advertisers will support it, because people do pay something even when a service is free–they pay with their time and attention.
Kevin Kelly’s oldie-but-goodie “New Rules” book has a nice little discussion of the gift economy and how it helps people figure out how to provide things in cheap ways after they’re done giving it away for free.