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.