
Charging from Day 1: Genius or Deathknell? - bradleyjoyce
http://squeejee.com/blog/2009/10/29/charging-from-day-1-genius-or-deathknell/
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idlewords
One point the article doesn't stress is that charging money removes a whole
slew of problems, chief among them spam and ghost accounts. This frees up a
lot of development time, since you don't have to make the system resilient to
waves of signups by people you'll never see again, or spend a lot of time on
abuse prevention.

That's the good part. The bad part is, you then use all that spare development
time on getting your payment system working smoothly. Since you are taking
someone's money at the very outset, making a decent first impression becomes
especially important. I suggest setting up payments so if something goes
wrong, the account gets activated anyway, and you settle up later by personal
contact with the customer.

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bradleyjoyce
very good point about the spam/ghost accounts. we've seen that ring true for
our free beta of Floxeee. Usually the people who are using your product for
free are your worst customers.

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wgj
Apps that rely on network effects to be successful need a free model, or an
existing base with critical mass. The latter is nice if you have it.

Freemium is a great way to get some users to pay for value created out of the
total network effect created by mostly free users.

I don't think Markus Frind was swinging for the fences when he created
plentyoffish.com with a free model. I think he realized how hard it was going
to be to get enough people on a dating site to make it interesting.

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byoung2
I couldn't agree more...there's no way Facebook or Twitter would have gotten
as many users as they have now if they charged for their services on day 1.
They _might_ be able to get away with it now.

But for other apps that provide a more tangible service and don't rely on the
"network effect" (say, Evernote or Freshbooks), there is a compelling case to
charge from the beginning.

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wgj
The article argues that all such apps are "swinging for the fences" and I
don't completely agree with that. You can plateau a lot smaller than twitter
and still benefit from delayed revenue, or alternative revenue models.

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bradleyjoyce
it's an obvious generalization... every app is going to be different depending
on it's purpose and target customers/users. Your example of plentyoffish is
perfect. A site/app like that DEPENDS on having tons of active users, in which
case the fastest route to that is free.

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alttab
One question not asked enough is "why do you want to make a web app?" if it's
to do what you love and get paid for it... Then do what you love (make apps)
and get paid for it(charge money).

Mark z's goal on facebook was probably not to make millions upfront. He had
different motivations and because that came through in his work, the money was
merely a side effect.

The mistake some entreprenuers may make is they are driven by what they love
as an independent vehicle to monetary success, then choose to make something
people won't want to pay for.

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dotBen
(to paraphrase:) "Do you want 10,000 users paying nothing or 1,000 users
paying something"

This is the key take-away for me. I know a lot of founders who, frankly, are
building startups for megalomaniac reasons.

I think there is some "look at all these users who like my product (and thus
me) so now I'm a rock star" philosophy in there, which isn't helped by people
like Ashton Kutcher and MC Hammer coming into the scene.

We're about to complete a pretty tasty angel round for an SaaS app that has a
healthy monthly recurring subscription on it from Day 1. I'm pretty psyched.

However, because its b2b it's never going to achieve me the 'rockstar appeal'
that running a startup with millions of free accounts on it will would. I
don't mind, but I know that frankly that's what dis-interests a lot of
founders.

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webwright
False dichotomy FTW. There are tons of businesses that can extract tons of
value from free users. Freemium, lead gen businesses (Mint), and (yes)
advertising.

Getting paid in ego is pretty stupid, but amassing free users isn't
necessarily so. No reason to throw out the baby with the bathwater just
because of Ashton Kutcher, etc.

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dotBen
Ok so two points.

"Freemium" makes sense, cos there is a revenue stream in there somewhere. I'm
talking about startups that don't have _any_ business model.

Secondly, for every Mint I can show you a ton of startups that have got no
where. In fact Mint is fairly unique because it uses the data for lead gen, as
you say -- but most free startups aren't smart enough and/or not hoarding the
right type of data to get into that business.

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webwright
Leadgen isn't just about data. Example:

There is a business where you can go to the web site and request a quote from
3 car dealerships for a specific year/make/model of a car. They sell these
leads to 3 car dealerships at $20 per. Last I heard, they were doing millions
in revenue a month. I also know a senior housing directory startup that's
selling customers on a per-lead basis and doing quite well.

I'm all for obvious and immediate business models. I think it's a lower risk
path (and it's the one I've chosen), but the go-free-and-get-popular is a
pretty tried and true path that's worked for plenty of folks. But it DOES
require that you get popular, which is really hard to do. SaaS stuff can be
lucrative if you don't manage to be super popular.

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ruslan
I'm waiting another post from this guy describing how they got tired fight the
fraud and now they do offer their app for free.

PS. We are charging from day 1 and it's damn not easy. Really! If fraud does
not kill you in a year, there's 90% of success.

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bradleyjoyce
what's your argument here... don't charge because of the potential for fraud??
That's crazy. If we all took that stance there would be no such thing as
business.

with spreedly plus processing through paypal, there is a high level of fraud
detection. We've actually rejected a number of payments because of high fraud
potential.

The rest is just business and the risks associated with it.

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imraj
paid system definitely has its benefits, while you are debating free vs
monthly charges, how about one time nominal sign-up fee till the site is in
business? Similar model as iPhone Apps, where for some odd reason, people are
more inclined to pay than for web apps. I wonder if anyone has had serious
success with such a model on the web ?

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vaksel
that nominal sign up fee will kill 90% of your potential users.

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imraj
I see your point, but 90% is just an arbitrary number I am guessing you have
made. But number is going to be up there, so 90% might be a good guess. I
probably won't pay monthly for facebook if a day like that comes. Unless you
provide a service that provides constantly changing information of sorts, it
is hard to charge customers monthly, I would have a hard time paying for the
game scramble that I play on facebook. I might be tempted to pay them $5 once
after trying the game for a month,

I might be wrong, but this might be worth exploring as a revenue stream for
simple applications. Donations probably still do better than this.

