Is Giving Away Free Facebook Apps Bad For Businesses?

How does a company transition turn a product giveaway into a money-making proposition?

Lujure is giving out free Facebook applications for small businesses. After launching on January 1st of this year, at barely six months old, the company now has 13,165 subscribers. The paying ones are forking over between $5.49 and $195 per month.

We spoke to the Lujure’s founder, Nathan Latka, and learned:

  • The app allows you to create a tab that can use one or many of the 34 widgets available. That includes YouTube, e-commerce, comments, iframe, LinkedIn, and even Google Plus. You can fan gate (require a user to click like to see special content), by simply uploading the image that “gates” the fan page. The WYSIWYG editor allows you to simply drag and drop apps onto the canvas on the right side, then resize by dragging.
  • Non-programmers can do this. Normally, custom tabs have required some understanding of static html. You can create custom tabs in a few clicks.
  • Small biz folks are using it. Lujure’s average business user (their premium package) has created 22 tabs. Consultants (medium package) have created four tabs, and personal users have created 2.3 tabs on average. I tried it myself and made a couple tabs without even needing to watch the eight-minute demo video.
  • You can use it on Facebook directly. Being able to do it on Facebook directly simplifies the process of associating your application to your fan page. It also means you don’t have to go through an arduous registration process, since you’re already on Facebook.
  • It’s free. There’s no catch, either. No credit card required, not a limited time offer, no limited functionality. I spoke with Nathan about this and his response was that he intended to release some new killer items that will encourage folks to upgrade to a paying product. If anything, it will become “freer” over time, he said.



In the last 72 hours since the private launch, the app has over 1,000 installs. The app reviews, always telltale signs of quality, are mostly 5 stars, with the exception of some competitors that have come in to weigh down Lujure with 1 star reviews. I spent time asking questions on their wall to test their responsiveness and found them to respond consistently, rapidly, and skillfully. The proof of a company that does Facebook custom tabs is whether it uses its own tabs, how well they respond to customers, what size audience they have generated, and the general sense of that audience.

Analysis

Giving out products for free is often a risky venture. Unless the premium offering is strikingly superior, Lujure risks cannibalizing future revenues with this fully-functional free offering, plus saddling their company with the support costs on this user base. We asked Lujure whether the company is concerned about the ability to maintain a high level of support as the user base scales; the response: the current number of support questions is low, despite having 13,000 customers.

The free Lujure Express product does limit you to one Facebook page, but you can have unlimited tabs and apps within that. Lujure hopes that small business owners with only one page will want to upgrade to the packages that removes the Lujure footer, provides unlimited storage, allows access to premium templates, and shows the client manager (if you have many clients to organize).

I personally believe that Lujure’s move here significantly undercuts the market. The price of free is stimulating significant adoption. We asked Latka about this and this is what he had to say:

Because our tool is the easiest and quickest to use in the market, over 13,000 small business owners, agencies, and brand managers have chosen it as the go-to fan page customization tool. We intentionally charged these early users 80 times to 100 times our incurred costs so we could invest heavily in product development and R&D.

We found we didn’t need to pay for R&D — we aggregated thousands of suggestions from our users on our wall. Because of our significant monthly recurring revenue, talented license partners, and efficient distribution channels, we’ve been able to remove the cost to consumers considerably. Lujure Express is a prime example of this commitment. The tool is completely free.

This is something we will continue to do. We think it will be extremely difficult for larger competitors in the space to compete with our pricing because of their inflated burn rates. We will continue driving revenue because of creative costing models, remarkable products, and the unique market we’ve segmented and targeted: non-coders who hate templates.

I believe that there is some degree of commoditizing of apps, given that the market is four years old and starting to show some maturing. To differentiate in the marketplace, Facebook app developers have to provide unique value in other ways. Nathan had this to say about his growth plans and what we could look forward to:

While we currently have the most apps available for fan page customization, our goal is not simply to have the most apps. Users don’t need more choices; they want simple, highly-customized solutions. Additionally, we believe software should be complex but not complicated: complex on the backend, not complicated for the user.

To meet this need, much like Amazon built a recommendation engine, we are working on patentable property which will learn about each user’s habits, pages, and personalities to predict with a high degree of effectiveness the page styles and designs each user would like. This will allow for frictionless, highly effective fan page customization for all of our Lujure lads and Lujure ladies.

Although it may not bean ideal choice for brands that are running a contest or are used to agency-level support, all in all, Lujure offers a great product at a great price for small businesses. Watch the video here for more information.

Dennis Yu has helped brands grow and measure their Facebook presences. He has spoken at Search Marketing Expo, Search Engine Strategies, Web 2.0, The American Marketing Association, PubCon, Conversational Commerce Conference, Pacific Conferences, HostingCon, Affiliate Summit, Affiliate Convention, UltraLight Startups, MIVA Merchant, and other venues. Yu has also counseled the Federal Trade Commission on privacy issues for social networks. Yu has held leadership positions at Yahoo and American Airlines. His educational background is finance and economics from Southern Methodist University and London School of Economics.