Comments on: Web freeloaders can breathe easy at Web 2.0 Summit

The freemium model makes more sense than ever in this rough economy.

[ajhoughton]

You said that

"This isn't necessarily true for software, since once an app is distributed to the user, the cost of maintaining its functionality is zero."

While I agree that the cost of maintaining existing (working) functionality is essentially zero, you're forgetting the costs of support, of documentation, of bug fixing, and of providing various other resources for your customers. Of course, lots of people forget those things, and some companies don't bother doing them in the first place, but I think it's unarguable that consumers and businesses alike do value these kinds of things.

Interestingly, some of these costs may be lower for "web apps" than they are for conventional applications for one reason or another.

[Spreedinc]

Very interesting post and something that is very near and dear to my heart given that we operate a free web application. One cost that you didnt mention (other than bandwidth and infrastructure) is the cost of updating the app. The days are gone that you can simply develop and post to live. The web app is now a living breathing part of your brand and to maintain a strong relationship with your customers is crucial. I am finding the cost of getting developers to work on feature enhancements to be creeping up on all my other costs.

Do you think that you should offer a free service from the start and let your beta users (early adopters) try out the paid product for free or do you think it should be for pay from day 1? It's a very interesting debate and one I would love to have with you at the Web2Summit! Let's try and meet up at some point

Dave Coleman
Spreed:News

[new_media_works]

Interesting -- would you say that Google is a "free service"?

[rafe]

Well yeah, Google search is a free service for consumers, but if you want to advertise through Google it's not free at all. Nice business model.

[new_media_works]

I can't find a link to "reply" to Rafe's comment. :S

Anyways, "not free at all" sounds a little bit like "expensive". Seems to me like there's a niche in there somewhere -- perhaps for websites that achieve top rankings on *all* "one-size fits-all" search engines (for such terms as "causes" or "news" or whatever...). I have dubbed this approach to information retrieval the "Wisdom of the Language" (see http://gaggle.info/miscellaneous/articles/wisdom-of-the-language ) -- since such sites (which naturally rank highly in "organic" searches, since that is what web searchers have come to expect) are usually focused (or "targeted") to specific audiences (namely those interested in information related to particular keywords / keyphrases).

I have experienced VERY HIGH click-through and conversion rates at such web addresses (keyword/ keyphrase URLs).

[PBwikiChris]

Rafe,

The way we think about it at PBwiki is to try to convince our users to self-select into paying customers. We get so many new users (thousands per week) that it would be difficult to have a conversation with all of them.

Instead, we focus on making sure our premium product is differentiated from our free product with functionality that is only or disproportionately useful to business customers.

You can think of this as being similar to the classic airline industry trick of the Saturday night stay--business travelers don't want to be away from home over the weekend, while price-sensitive consumers don't mind.

Our premium product includes features that your ordinary consumer doesn't need, like single-sign-on integration with Active Directory. We want all versions of our product to be useful, but we want them to be useful for different audiences.

Chris Yeh, PBwiki, Inc.