

When free sucks - marketer
http://ryanmickle.com/post/4045563701/when-free-sucks

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tomkarlo
For a VC-funded company, when you charge users, you end up with two results:
fewer users, and a very clear concept of the lifetime value of a user. If your
cost of acquiring those users is higher than the LTV, you have a huge problem.

With a free site, the cost of acquisition is lower, you have a big fat user
number to quote (even if many of them aren't actively using it, since they
don't have to pay, they don't cancel) and the LTV is a future, "undetermined",
number. So it's not as apparent that maybe a business isn't generating real
value.

~~~
Silhouette
> So it's not as apparent that maybe a business isn't generating real value.

Of course, it's also not as apparent if your business _is_ generating real
value. If you were looking to make an investment, wouldn't you look for a
business with proven value over a business with hypothetical future value?

~~~
tomkarlo
Not if you're a VC. The whole point is to see value where it's not obvious,
because it hasn't materialized yet.

If there isn't a huge spread between the obvious present value of a business
and its /potential/ value, then you can't make an investment where you expect
a 4x-5x return. Those kinds of returns only show up when there's a lot of
uncertainty around both the current value AND the future value (and most of
the value of a new VC business comes from the discounting of its future value,
rather than a calculation based on its current performance.)

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epenn
Advertisements don't necessarily have to devalue a product that's free to the
end user. It depends on how and where those ads are displayed.

Twitter is a good example of a product that could certainly use less obtrusive
ad placement (i.e. no "dickbar"). However, it's possible to have noticeable
advertisements that do not impede the user experience. Google, Bing, and
Facebook are all great examples of this.

I realize the article is about more than just advertisements in free software.
The common outcomes of free that Ryan speaks of are spot on in my opinion.
However, I do feel that free, based on advertising, and good are not mutually
exclusive.

~~~
rwar
Advertisements are also not the only way to monetize (and add value to) your
product.

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Kylekramer
Freemium is an excellent model to get healthy returns, but it is somewhat
limiting. Twitter clearly wants to the next billion dollar ubiquitous company,
a la Facebook and Google, not just another barely profitable mid range company
like Skype or Flickr.

Of course, that is a gamble (MySpace had the same dreams at one point), can
lead to suckier products, and Twitter isn't exactly nailing the execution, but
I can see why they don't want to charge.

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bradleyland
Value is often derived from the cost of the alternative. I'm not sure I can
buy the argument that Twitter should not be free when users could quickly and
easily migrate to another free service, like Facebook. I know, Facebook ≠
Twitter, but how far do you think Twitter's user count would plummet as a
result of even a marginal fee?

I'd like to see it happen, if only for the fact that we'd have a fantastic
case study for future generations of social networks.

~~~
lsc
Twitter is in an interesting place. As a one to many broadcast medium, they
have many people who are using it commercially, people like me who would be
willing to pay a fee. Really, twitter charging me $5-$10/month or so is not
going to register much more than twitter being free, at this point.

What they have to be careful of is that if they start charging the non-
commercial users, those users will go elsewhere. And if those users go
elsewhere, the commercial users will also go elsewhere.

So, if they can figure out how to charge me without charging my customers,
they are golden. How to do that? I have no idea.

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TimJYoung
Are we starting to see a reversion to the paid model as the best way to sell
software and software services ? Personally, I hope so.

~~~
wladimir
I have no problem with that either. In that case, micropayment needs to be
dead simple though, I don't want to fill in my personal and credit card
details for each site. Both from a privacy and convenience perspective that's
a big no-no.

~~~
niels_olson
This. My personal prediction: It will go the way of auth, where known trusted
companies become the custodians. I'm willing to bet Facebook, Google, Apple,
MSFT, and others with large subscribed bases are nursing at least one,
possibly several, entrants into this space, but are waiting for evidence that
people actually grok micropayments first.

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apress
I'm getting kind of tired of this argument by anecdote kicked off by the
Twitter not-so-smart bar. A lot of the examples have much more to do with
acquisitions by big cos that neglected the services after purchase. Do we
really have to run up a huge list of free services that have stayed entirely
free to users and are still good (Yelp, Zillow, a million things from Google,
Goodreads, IMDB, all the IM services) or that charged money and stink, have
gotten worse or disappeared altogether (Mozy, Xdrive, MOBILEME, Gizmo)?
Charging does not equal profitability and other revenue streams are available
beyond directly dunning the user.

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idlewords
Being a for-pay service can be a feature in itself if your business is based
on storing user data. People are naturally risk-averse when it comes to their
bits. Profitability reassures them that you have some kind of plan, and the
fact that money changed hands reassures them that they'll have some kind of
redress if you screw it up.

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sundars
I think people are ready to pay for simplicity and ease of use. examples:
Dropbox (as opposed to box.net), hipmunk (as opposed to so many.... Orbitz,
expedia, etc)

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andywhite37
I think people need to just get over it. It's a free service. Almost every
good, free service on the internet has some amount of annoying advertising.

~~~
krschultz
But at what point is that annoyance more of a cost than what the customer
would pay?

I wouldn't pay for Twitter because I barely use it, but I would gladly pay for
Mint.com to get rid of the ads, suck up valuable screen space on an app I use
daily. And I do pay for Remember the Milk so I know it stays around. I'd pay
for Gmail and Google Calendar.

But everyone is afraid of charging. Some users would surely switch away if you
had to pay, but many wouldn't. How much productivity did Gmail originally
bring to the table? Did they capture anywhere near that value via ads?

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shasta
No one will pay for Twitter. That's their problem.

~~~
maurycy
_No_.

<http://news.ycombinator.com/item?id=2350147>

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tynan
I would pay a few bucks to take ads off of pretty much every single Android
app I use.

~~~
orangecat
Agreed. Ads on mobile apps are even worse than usual: you have limited screen
space, bandwidth, CPU power, and battery life, all of which they consume. I
charge directly for my non-opensource Android apps rather than polluting them
with ads, and it's worked well so far.

