
The Free Ride Is Over - twampss
http://mattmaroon.com/2009/03/09/the-free-ride-is-over/
======
pg
I will literally bet money that this is false. There are some startups where
you want to charge users, and some that you want to be free and just go for
growth, and which strategy you use depends on the nature of the startup, not
the state of the economy.

Thinking that every startup has to start charging its users now because the
economy is bad is just as mistaken as thinking a few years ago that no startup
had to charge its users because the economy was good.

~~~
vlad
_I will literally bet money that this is false._

You already do.

A lot of genuinely smart individuals post, comment, or author a lot of the
content that appears here. Many accomplishments abound, including:

1) selling a shareware app written years ago.

2) founding and editing the top tech blog.

3) making a lot of money playing poker seriously.

4) completing their degrees early in life.

5) having written thousands of small and large programs over the past thirty
years.

6) having an influential role at a company ten years ago.

Those who are in the game and not for the glitz are the ones whose opinion
matters, and that opinion is to go for it, by definition. They go for it, and
make decisions that put the company, customers, and themselves in the best
position whenever decisions needs to be made.

~~~
pg
_You already do._

That's what I meant: that YC is happy to fund startups that don't make money
initially, if that's the right strategy for that kind of startup. So if you're
planning to start the next Facebook or Twitter, by all means apply.

------
spolsky
Hoo boy, this is what everybody was saying at the end of Web 1.0. Evan
Williams started a website called theendoffree.com
(<http://web.archive.org/web/*/theendoffree.com>).

Then Web 2.0 happened. Ev starting doing free things again.

Coincidentally, the "End of Free" theory comes in waves, timed to the business
cycles.

~~~
trapper
It certainly would be interesting to go through crunchbase and do some exit
analysis for each of the companies. I would hypothesise that there would be a
really high failure rate of companies who do not charge. Conversely a "huge
exit" rate for companies who charge would be insignificant.

It will be interesting to get your take given your position with a stable paid
business vs stackoverflow - which do you see as the best long term?

~~~
axod
That would be _really_ skewed. Most websites making money from advertising
don't bother getting on Crunchbase. They don't need to go the whole 'schmooze
VCs' etc route.

------
axod
Sounds like you just haven't run a successful advertising supported website.
This whole "advertising is doomed, get people to pay" meme is getting really
tiresome. Especially since it's coming from people who don't seem to have made
a living from advertising before. Perhaps they tried, and failed, and now
assume that it's impossible to make money from advertising. It's not. It's
about as easy/hard as it has been for the last 10 years.

>> "The recession is the straw that has broken the camel’s back."

I'd be interested to hear why you think 'paid for' will survive a recession
better than 'ad supported'. Do you think if money is tight, end users will
keep paying for various websites? I'd wager not. Do you really think you're in
a good position to know if it's broken the camels back or not? Is advertising
revenue down, or up?

Also, alexa100 isn't important. There's tons of websites that don't even
register on alexa, that make a living for their owners or far more from
advertising. It's all in how targeted your traffic is. If you only get 5
visitors a day, but they're _all_ ready to sign up for a gambling website
through your affiliate link, that's more than 'ramen profitable'.

You should try it :)

~~~
johnyzee
That's what I thought reading that post.

Adsense, as an example, is a real and viable business. I could quit my job on
my one Adsense site if I had just 3000 visitors per day (assuming CPC held
up).

The model makes money for me, Google, and, I assume, the advertisers. What's
not to like?

------
drusenko
I'd have to disagree a little here: I think the "free" aspect of the web is a
tendency towards marginal cost. If the marginal cost of a user is a fraction
of a cent, it does not make sense to charge every user -- they inherently know
that the service should be free, and even if they don't, a competitor can gain
an easy advantage by replicating what you do and offering it for free.

Amid all of this "free" bashing, it's also very important to note that not all
"free" services are supported by ads. The "freemium" model (free services
supported by paying users) works quite well for many services, including those
that have a high enough marginal cost that making money off of advertising
isn't enough -- these should be the same services people are willing to pay
for, since they cost a lot more to support.

If they aren't (ie, the YouTube example), then you're probably just fucked.
But it may very well still be early to call the game on YouTube, for example:
the internet has a notoriously short time span, even though it might take a
long time to "mature" a business. I'm not familiar with YouTube's specific
financials, but given the size of the site and audience, I would be very
careful to rush to conclusions on the current and future profitability of the
site.

------
tdavis
I like products that make money because it feels to risky to do otherwise.
Places like Digg have almost no hope for making money at this point outside of
an acquisition, never mind the crazy amount of dilution all the VC money
brought them, making the size of that acquisition much, much larger.

Without a way to make money, you end up having to take _a lot_ of money. In
return, you give up most of your company. So now you're working for somebody
else and waiting around for an enormous exit so that you can then work for
somebody _else_ for a few years so that then, maybe, you can escape with
enough to cash to do it again? That sounds awful.

I'd rather have half a dozen small companies that together bring in enough to
live happily off of than a single company that is predicated on a gamble and a
hope that it will make me filthy rich sometime within the next decade. At the
end of the day, all I really want to do is hack, write, read, and play video
games. I don't need to have a company acquired by Google to do that.

~~~
pg
_Without a way to make money, you end up having to take a lot of money._

That's not true. Digg may have raised a lot of money, but Reddit got big on
very little. They were ramen profitable when they were acquired, and could
easily have stayed that way if they hadn't been.

------
garply
Hasn't the primary business model of media companies (newspapers, radio, TV,
etc) been advertising since the rise of widely circulating newspapers?

That apparent historical trend makes me suspicious of claims that the ad-based
model won't be the backbone of many (or most) internet media companies.

------
andrewljohnson
It's true that ad models are not right for all, or even most companies.

However, in the BIG internet business, I think the key is to build a website
for everyone. Maybe that's a freemium model or maybe that's an ad model. But
it's gotta be some sort of model that gives everyone access.

The web is the only medium that reaches billions of people, and the Googles,
the Flickrs, the Amazons of the world build a business that everyone can
access and use, for free.

You can build a small internet business for a subset of people, but the
businesses that make the big bucks, that get funded, and that change the world
are apps for everyone.

That's why I got into this business - to build a machine for everyone to use.
It's an exciting thing. It used to be that the most important thing you could
do to influence the world was to write a book. Now it's making a website.

~~~
msort
The Book vs WebSite analogy is good.

The free+ad vs charge model is like OpenSource software vs Retail Software.

The free model has the best scalability.

------
Tichy
Where will all the billions that are being poured into advertising go if there
is no advertising anymore?

Why wouldn't the market regulate itself? If all web applications become
premium now, there will be no space left for ads. The few remaining places
might be able to receive higher prices for their ads. Higher prices for ads
will mean freemium becomes interesting again. And so on...

Or there will always be freemium apps that compete with the premium apps, and
the premium apps are doomed.

------
qubikle
Matts understanding of business is flawed. The web is CHEAP. Very cheap. Free
IS affordable. That's why it's there.

