

A radical business plan for start-ups: Charge people. - fmanjoo
http://www.slate.com/id/2203436/

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helveticaman
>Hansson calls this the neighborhood Italian restaurant model of Web commerce:
It's a lot easier to start a nice neighborhood restaurant than it is to start
the best Italian restaurant in the world (the Google of restaurants). But just
like their bigger brothers, neighborhood Italian restaurants make money. Sure,
they don't make as much as the best restaurants in the world, but they do well
enough—and it's not nearly as much of a headache to run a neighborhood
restaurant as it is to run a place where investors, critics, and the world's
press are breathing down your neck.

This metaphor is bad. On the internet, there can't really be that many Italian
restaurants because there are no local monopolies and no marginal costs.* On
the internet, there would only be one Italian restaurant, and it would be 37
signals.

*Sure, there's the speed of light and the cost of electricity, but these are not strongly limiting factors.

~~~
cglee
Isn't this what the 'long tail' is about? Online, your 'neighborhoods' are
demographic niches.

Now, if the needs of your online 'neighborhood' have already been met, then
that's similar to living in a neighborhood full of Italian immigrants and
still looking to start an Italian restaurant nearby. You'll have to move and
learn about the needs of other 'neighborhoods'.

~~~
mlinsey
Many people (including Eric Schmidt in a submission that was posted earlier
this week, although I've certainly heard it before) argue that the Internet
follows more of a Zipf's Law distribution
(<http://en.wikipedia.org/wiki/Zipfs_law>) than a "long tail". In other words,
the bulk of the traffic and therefore the revenue is in the head. As a
corollary, the Internet doesn't get rid of celebrities, it creates bigger
celebrities.

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run4yourlives
I can only speak for myself, but I wouldn't pay for facebook.

~~~
ryanwaggoner
But would 5% of their users? I could see that.

~~~
tom_rath
If only 5% of your Facebook network existed, would you use (let alone pay for)
Facebook?

~~~
ivankirigin
Typically, there are free tools, and premium tools available to those who pay.
They could work on some new features, and only release them to premium users.
Ideally, the features are only interesting to those that care a lot about
their profile. Analytics are a good option.

They should become a media company though.

~~~
derefr
If they charged people for any custom applications they wanted to put on their
profiles, and then gave some of that money to the app developers, I could see
both a dramatic decrease in crud, and a dramatic increase in the quality of
apps in use (cause, y'know, they're paying for 'em.)

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rewind
I think the Facebook example is a terrible example. If that had been their
business model since day one, then fine, they can do whatever they want
because every new user knows what they're getting. But if they get huge
because users are flocking to their site without having to pay anything and
dedicating a lot of time to the site, they shouldn't TAKE AWAY features that
were previously free. That just seems wrong to me. That was the model they
chose and that's part of the reason why they got so big. I don't think very
many people created a Facebook account with the idea that they would
eventually have to pay for what is currently free.

If FB had this business model from day one, I highly doubt they'd be as big as
they are now. I think it's up to them to figure out a way to make money while
not charging for any CURRENT features. If they want to charge for new
features, that's fine; otherwise, it's just a bait-and-switch and they're
doing a major diservice to the large user base that made them who they are.

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charlesju
The moment Facebook does this, I'm starting a Facebook knock-off and stealing
every single one of their customers.

~~~
pmjordan
Then you'd eventually start burning up too much cash, would have to start
charging, someone else would clone your facebook clone, and the cycle would
start afresh. This is the social network predicament.

~~~
iseff
Yeah, but if I did it, I would sell for a billion dollars. :)

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gamble
Facebook's business model: cross their fingers and hope very, very hard that
someone decides to acquire them before the cash runs out.

~~~
Raphael
Yahoo already tried.

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hs
even 37s products embrace free/no-money strategy to some extent

she can charge $ because the products have business use

next, the challenge for 37s is to make a pay-for-use 'wasting-time' sites ...
with NO free trial

impossible?

