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Customers won't give you money unless you ask (downie.com.au)
77 points by toast76 on May 20, 2013 | hide | past | favorite | 28 comments

This is some good advice. I would also love to see start ups asking for my money.

When there's a free plan, my usual activity goes like: - Register - Test - Forget

But when I'm paying, it's much different. Not to say that all services shouldn't offer anything free. But at least in my case, charging is doing both of us good. And it also ensures that company will have some sort of revenue to live on and not die as a freemium company!

Especially if the freemium startup becomes an acquihire.

Free is always the spirit of the internet, but when starting a startup...I was told to spend as much time on my business plan (revenue), as I would coding.

When any website or app begins charging, or throwing ads out, there's always an outcry from the users that weren't use to it. Sure being free will probably make any startup grow faster, but to make your users happy...charge, have ads, or AT THE LEAST tell them that you plan to charge later, or aim for acquisition like Instagram :)

You should spend 90% focusing on profits, and 10% coding.

I think MySpace did that and if your goal is to build an audience on the basis of free99 then throw ads at them, you leave room to get taken over in your niche.

The view you present shows no pride in ownership, quantity over quality, and it still works though. As Seen On TV products are an example...sell cheap stuff so low, that it's not worth returning. Cereal and Chips and the packaging model is another successful example.

However, I still say, just like coding, there is an art in a business model, and the more dedication any entrepreneur spends on their implementation will determine their success.

The view you present shows no pride in ownership, quantity over quality, and it still works though.

I wonder how you got that from my comment? All I said is that in a business, the focus is on profiting. Code takes a back seat, because perfect code ever made anyone money. Though I'm not saying to develop a shitty code base. But in reality, the software is merely the product, and not the business. I take a lot of pride in my work, and do not ship/sell products built on top of bad code. But I do know that the focus is on the business side. That's why I'm able to successfully bootstrap while others fail with millions of funding. (:

Myspace failed because it did not adapt to the market. They got lazy.

What I got out of your comment was monetize at every possibility (maybe I misconstrued it).

>in a business, the focus is on profiting

This is what I agree with you. Websites/Apps are usually projects before they are cultivated into a businesses. Maybe it's semantics, but I think "profits," conveys the wrong message in your vague comment earlier.

If any developer wants to monetize their product (their code), I think what you're trying to convey (based on your response) is that much thought needs to go into the efficiency and risk/reward ratio. How much will your distribution cost? How efficient is Nginx vs Apache?

Basically, business practices will result in less cost (risk) for the project that turns into a business. Efficiency of the business model will result in the lowest costs for the project/business, to the point where profit is feasible.

What I got out of your comment was monetize at every possibility (maybe I misconstrued it).

No, that's not what I meant. Monetizing and profits are two different things.

Yeah, I figured it was on me when you actually started talking about business. I thought you were trying troll and say it's all about money and greed :)

Once you get to know me, you realise that I don't think its about money and greed. To me money is merely but a tool. Greed is the worse drug that has ever existed. I'm more about creating new things and jobs. To give back to society, rather than take from it. Sure, I will make money off of it, and will have a good lifestyle. But I make sure that others do so as well. All the money in the world doesn't mean a thing if you have to live inside a castle.

I think I'm confused on what the term freemium means. I always thought it meant a product with both a free and paid tiers.

This doesn't seem to match with "For example, Freemium works really well when your user IS the product." Such services, like the Facebook example he cites, are free, not freemium. Right?

I think there's facebook credits or something like that.

How about the google apps route as an alternative to freemium?

1. Give it away for free for a long period to build a user base, get feedback and iterate.

2. After a while, switch to paid only for all new users. The old users continue for free so no-one has a right to get annoyed.

Seems a pretty good option to me.

Its a great option, if you have millions and millions of dollars in the bank.

It does feel like a startup strategy is that if you can just manage to get a large amount of free users - then you'll be able to figure out how to monetize it later.

We all know that it works in exceptional cases. But many times when I see it, it reminds me of an old Saturday night live skit about "the change store" that provides change for any amount of money without taking a fee. When somebody inquires how they make they're money the owner replies "volume!"

While a good article, i disagree with his statement that by providing a free service, you are implying it does not have any value. I think the free service model is much more deeper than this comment suggests.

It is a very common result in cognitive decision-making studies that people don't value what they don't pay for. Whether or not you think the issue is more complex, the fact of it is very well established: in general, absent other measures of utility, price signals are used by purchasers in their initial valuation of a commodity. It's a limit example of the anchoring bias, a cognitive effect to which most humans are ridiculously susceptible.

There is a flow-on effect in the way consumers interact with a service provider, too: per account, you'll receive more complaints from free users than paying ones; vice-versa, more constructive suggestions from paying users than non-paying users. This result is explained as a choice-supportive response [look it up; "the tendency to retroactively ascribe more positive attributes to a choice invested into"], since the opposite behaviour would be a source of cognitive dissonance. It can be a source of frustration to paying users that their suggestions/requests are not then more highly valued by the service provider.

>>you'll receive more complaints from free users than paying ones; vice-versa, more constructive suggestions from paying users than non-paying users

This is SOOOOOO true! It's because monetary value comes with commitment!

I was taken aback too when I read that (his implication that "free"="cheap"), but (in my opinion) there is some truth to it.

If I pay for a product, I will use it to the fullest bang of my buck (example: we go around our house making sure we fill up our trash can on trash day). If I get a product for free, the engagement level, my interest, my commitment...it's not on par (example: trying an app in the app store that's free and deleting it because there's a bug, not wanting for a new release).

You can think of this article as a single case study, nothing really enough to build a theory. Freemium works statistically better than paid, as you can see presented at the recent Google I/O 2013: http://www.youtube.com/watch?v=yQ3wgPP7PWY

Good article, i will take it into consideration in the start up that i am currently working on. Only one thing that i don't agree, giving something for free dose not always implies it has no value.

Just curious, can you name any counter examples?

What if the demographic an app serves or aimed at is known to be notoriously cash-strapped i.e. university students ?

I think the notion of the "notoriously cash-strapped students" is a bit of a myth. Not that students typically have wads of cash, but most students I see around have iPhones, trendy clothes, spend money on booze and cigarettes. And even if you avoid generalizing students as trendy and cool, look at study aids students buy, they won't necessarily spare on a book or a laptop that would help them study.

At kenHub - we build a platform for learning anatomy. It makes students' lives easier and they can be more effective in their studies. As much as we'd like to give it away for free to all students, we need to make a living, and we need money to improve our products. Luckily, our audience seems to see the value and are willing to pay for it.

I think it boils down to the utility of your product, to students, grandmothers, or any other segment.

Well at the end of the day, somebody still has to pay you if your business is to continue running. So unless it's an ad-based business, you're gonna have to figure out how to monetise. It could be targeted at university departments instead, for instance, who you would convince to buy a license for their cash-strapped students. Point is, your marketing would have to be geared to that particular case. If you optimized to get non-paying students, you won't make money.

If your looking to make your product "exclusive," to a specific demographic....in the course of your business, someone is going to pay, whether it's you eat the cost, or your users do.

Even when Facebook started, it was hemorrhaging debt in the beginning...and eventually, they went to ads (even with the outcry). User's usually hate change, each product is different, so try to constantly ruminate a method or revenue (maybe even for select users in your demographic).

Actual value vs Perceived value, a key question that many forget and that could solve many monetization problems.

Sometimes when the service is not ready for immediate consumption, devs are bound to release it as a freemium or just free - if they have to release for some reason.

There are so many web services are coming out everyday, people cannot just find it very suitable for them and cannot find whether it's good enough.

Trial period is good but it is not as good as freemium.

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