
The First Penny - getting your users to pay you anything at all - semigeek
http://redeye.firstround.com/2007/03/the_first_penny.html
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paul
It's important to understand that there are a lot of non-monetary costs
associated with paying for things, such as entering payment info and deciding
whether it's actually worth paying for in the first place.

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immad
agreed, clearly the discontinuity in the demand is based on the non-price
costs, which is why people like the idea of easy micropayments so much. But
the psychological difference between free and not-free is pretty significant.

~~~
paul
Exactly. Even with micropayments, I would still have to think about it, and I
don't like having to think. This is part of the reason why the most popular
micropayment system on the web is Google AdSense.

On the other hand, I regularly send text messages on my phone without much
though given to the crazy $0.15 per-message fee.

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drop19
I've actually never read anyone discussing the elasticity of demand for web
services. Here's a thank-you to my econ teacher in college!

Sobering quote: "The biggest gap in any venture is that between a service that
is free and one that costs a penny."

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jwecker
It's kind of funny- I think about web apps constantly. After reading this,
though, I decided to make a list of the web applications that I have actually
paid for. I could only think of one- it was one of the ediet ones that lets
you pick your diet (out of many popular ones) then emails you meal plans and
shopping lists each week. I'm not even on a diet.

The fact that it saved me time and thought thinking through healthy meals was
what got me to pay. And it made me realize also how few web apps actually end
up saving me time in the end (which is the make-it or break-it factor for me,
but I realize probably not for others).

So here's my question- what web apps have you other news.YC'ers ever actually
paid money for? Any?

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imp
Also, a friend of mine used one of the major dating sites like eHarmony, and I
think it cost her about $20 for 3 months. As in your example, it seems like
the money is worthwhile because it saves time.

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Readmore
It may just be me but I didn't really get much from this article. The author
states that it's hard to get users to pay for something, and then doesn't
offer any advice as to how to fix the problem.

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cnaclerio
I think how you fix the problem is finding other means to make money rather
than having users pay. I must admit, if I see a dollar sign on a website, I'm
less likely to even try it out. And if I never try it, then I never get
hooked, and everyone loses.

I think we're on the verge of a new form of web advertising. One that works,
actually makes money, and isn't annoying (like flashing banners). Google's way
is a good start, but we need something revolutionary, and once it happens I
think the question of whether or not users pay becomes futile.

~~~
run4yourlives
I think how you fix the problem is finding other means to make money rather
than having users pay.

The one issue with this is that it smacks of dot-bomb "Build it and they will
come" thinking.

Although a few leaders will emerge, I don't think it's a viable theory for
most start-ups. You're better off lowering your expectations and sharing a
piece of a smaller pie.

Of course, VC's don't like that thinking too much.

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Readmore
It is true that making your users pay to try your product is the best way to
keep your userbase small. I think that offering a free version and then a pay
version with extra features is the only real way to expect users to pay. The
problem is what happens when someone else comes along and offers all of your
features for free? Google was really smart with Gmail because they started out
offering people 2 gig of space, which seemed insane. What was even better is
that they then made it constantly 'increase' so it seems like you have as much
space as you'll ever need. But if you actually watch that ticker it's
increasing so slowly that it probably isn't costing them any more money, and
in fact their cost probably goes down, to give each user that much space.I
guess my point is that once you have a user offering them a better 'precieved'
value, even if it's not better than someone else, will get them to stick with
you, or get them to consider a pay account.

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semigeek
"But if you actually watch that ticker it's increasing so slowly that it
probably isn't costing them any more money"

Multiply the increase by the amount of users that receive it and the number
doesn't seem so small - and can never be considered 'no cost'. The trade off
is that with the more mail they can index per user, the more relevant
advertisements they can display and the more people they can lure with their
gimmick. Of course, they're also taking advantage of the 10% rule when it
comes to offering that large amount of storage.

~~~
Readmore
Agreed. Storing more email helps to target their ads, and most users will
never use the full amount of space. Also, at the rate that storage gets
cheaper they are able to continually increase the limits. It's like the
problem that Amazon had with excess servers, they had so much infrastructure
that they needed something else to do with it, to fix the problem they started
the EC2 and S3 programs. Gmail could serve the same kind of purpose for
Google.

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MEHOM
The key objective is to develop an solution that would either generate revenue
or save time and money for the user. If you cover that in your app, your group
got a winner. Remember the key is to develop solutions not "stuff". An old
economy rule for consultants. Be a problem solver.

