Alexander Vanelsas has written a great post in which he analyzes the pros and cons of a free business model as well as the “freemium” business model. Alexander proceeds to list out a variety of things that result from having a free business model. Here are a few of the things that Alexander highlights:
- Free leads to destination sites with walled gardens
- Free makes the network more important than the user
- Free leads to forced attention on advertisement
- Free leads to customer lock in instead of customer freedom
Many of his examples make a lot of sense and just by taking a look at the highlights you can guess what companies Alexander is referring to. The main point that Alexander makes is that free is not for everyone. This is a great point and I would argue that for most, free is not ideal. As the onslaught of free services continue, it is too frequently that we register for and quickly forget the services that we’ve used.
Only a few stick. The reality is that charging for your service can actually provide an advantage. The buyer immediately perceives some sort of premium offering when you charge for it. They will also check reviews and try to determine what sort of experience other paying customers had. One of the best parts of charging consumers is that you actually get paid to make changes that customers request.
My belief is that as we see an influx of free services that claim to provide valuable solutions, users will continue to maintain high expectations. If a large portion of free software doesn’t meet their expectations, they will simply pay for it. I’ve done so myself and I’ve worked for companies that will pay for perceived reliability even if the paid solution doesn’t provide it.
As our time becomes more valuable and we waste more time on our free services, we will turn to paid solutions. It’s as simple as that. Conversely, if your free solution ends up really being a “solution” to a lacking feature on a Web 2.0 site, it really may not be worth paying for. An example of this would be a social network with a better user interface than Facebook. This really isn’t something people will pay for.
While the solutions to lacking feature sets isn’t the best way to build a paid model, you can generate revenue by building solid products that truly provide value for users. As Alexander points out, it is our job to discover solutions that truly find value. Do you think the free model continues to make sense or does the paid model finally make more sense?