We've been huge fans of Website Grader since Jan of 2007, we blogged about it here http://www.skmurphy.com/blog/2007/01/29/what-is-your-website-grade/
I think this is an example of getting freemium right. I would be very interested in a post on how you planned and managed that.
You said “It's now time for entrepreneurs to innovate, not just with new products, but new business models.”
I agree and we did, we understand that the future of our nation's economy depends on the ability of the small business owner to bring his/her vision to life.
That's why we built the new <www.Fundingroadmap.com>, the first online business plan and due diligence reporting system that anyone can use to make the funding process faster, easier and more cost-effective. Now funding sources and entrepreneurs can work with a state-of-the-art digital platform to facilitate their mutual success in our challenging credit /investment environment.
We charge consumers and master license holders because we give value and a product that can't be found anywhere else. We provide a system and information that one would have paid thousands of dollars for before we invented our system, so the price we charge is well worth it and that is the whole point. People are looking for value for their money and they will pay for it when they find it and need it.
#5 and #6 reminded me of a Michael Dell quote I've always subscribed to: "The key is not so much one great idea or patent as it is the execution and implementation of a great strategy."
When you build a better business model, and continually innovate ahead of the competition, you stand an excellent chance of succeeding, even in this economy.
Great article! I think your topics are typically quite on point.
I was thinking of how Seth Godin gave away his book "The Idea Virus" for free - now he was probably pretty well known at the time - but I think the business model is to make something of value and allow people to recognize it for free - then the money will follow. I wrote why I think starting a business of value is a long term process because of this (http://corporatepreneur.blogspot.com/2009/01/building-business-is-long-term-process.html).
Also I couldn't have put it better than you did about subsidizing internet usage - but I have always been amazed that my own website could offer a free game to users and companies would basically pay the costs through advertising. The product is essentiall free to the users! Pretty amazing how the internet has changed the rules!
So complicated. What happened to:
- I want X
- X costs $Y
- I have $W > $Y
- I give vendor of X $Y
- I take X home
Just go back to that model and leave the innovating for your products.
Yes let's hear it for the innovators of business models like Netflix and Amazon and Ebay. Can't wait for the next wave to figure out how to monetize all the great content on the web!
I haven't found internet advertising working for me. (1) I cannot afford Webvertsing, because it costs are equal if not more expensive than print advertising and with so much junk email each day, who has the time to open up emails by the hundreds.
On a typical morning I receive 100-150 emails, Only 2-emails are directed to me personally, the balance are "JUNK EMAILS", I receive more junk Emails that I do in my GOSLOW POSTAL MAILBOX.
(2)My business is advertised via the use of Post Cards, Inexpensive, Quick-Read, easy to stick on the cork board by potential customer and not lost in the JUNK-EMAIL on the screen.
(3) My postcard sticks-out on every mailing, I receive a response of 20%, with 1% to 5% being real orders.
And finally about "FREE", Nothing is Free, not even "Free-Shipping."
I never bought "FREE" in any advertisement and When you view the implosion of the First Internet so-called Boom then Bust, Well be ready for Version II, to begin its spiral.
Their is too much data filling up all the Email space and when it all clears, many will look forward to reading their snail-mail from the postman.
I don't like online magazines such as Electronic News, I remember how I enjoyed reading the hardcopy, I was able to cut out important products I may need for product development or pick up deals on used assembly equipment, etc.
With Online mags, it isn't the same.
I don't even read the Wall Street Journal online, who likes moving the mouse up and down, over and across to read an article, it stinks. I run my BIZ from a laptop, after 12 hours of looking a screen on an average day, my eyes are tired. Give me a printed Newspaper or an industry magazine any time anywhere.
I don’t go with people who break their head and everything to innovate a niche which is going to make millions. Rather, it’s better to use common sense and find some thing which is on demand and Make it affordable, efficient and highly customer oriented. Best example for that would be Google.. Actually they didn’t innovate Search engine. Actually they copied just the idea of search engine and made easy and fast web tool for people without confusing too much..
People certainly do expect and look for "free" on the internet. And this may not be a bad thing...giving something away for free can increase your credibility (if your product/service/etc has value).
As you increase your credibility, you increase the likelihood that you will sell something (if that's what he's giving away for free, I'm sure that what he's selling is phenomenal!!) and people will tell others about you.
(At least, that's what I'm basing my marketing model on...)
It's interesting to me that 10 years after the tech boom that we still think that companies can succeed not making money. Personally, I would say it's okay to give away somethings if it's part of a business model to generate traffic for your paid products.
Twitter is an excellent example. They are having some issues figuring out how to make money with their tool. I would think that they would have been better off with a plan in mind as to how to use the tool to build a viable business.
Free is a great price for consumers but it makes sustainable business difficult.
Jeremy Refocusing Technology
"The article was good, but not a bit repetitive in places"
"The article was good, but *g*ot a bit repetitive in places"
Your point that even Facebook, Twitter, etc. hasn't figured it out is the key.
It's OK to dream about being as successful as they are, but surely your business plan doesn't depend on it! And even if it does, being that popular is clearly not enough. The purpose of a business is to make money.
It's OK to leverage free stuff -- in fact it can be genius -- so long as there's a clear path to profitability.
Not necessarily a likely
path, just a clear and rational and possible one.
Hi Dharmesh... very much 'on the money' with your comments. I especially agree with point #2. It is important to have a clear perspective on what exactly your variable cost is and what is the premium:standard:free ratio that your model can afford. This ratio has always existed and is applicable to all businesses. This is the ratio that stores and airlines and hotels and commodity traders and Dutch flower exchanges -- all have to manage in order to optimize on their revenue/profit goals. As much as we like to believe that the digital economy is some alien planet with its own unique laws, the fact is that the laws of economics are immutable, whether you are dealing in atoms or bytes. Somebody must pay!
Another perspective on this subject - <http://blog.countspin.com/2009/01/one-mans-fee-is-another-mans-free/>
The idea should be that of leveraging free services to sell paid ones which are different but somehow related. Like in opensource software: you get the software for free, you pay the subscription for support services.
Most of today's free web services are subsidized -not by a few paying customers, but- by optimistic (delusional?) venture capital and corporate investors.
I'm right with you on your comments. In the market that my new company is in we work mostly B2B, not directly with the consumer. With that and given the niche area we operate in, giving anything away can actually work against you. In fact, when we considered giving away a version of our software, the idea was actually beaten down severely in our first round of marketing analysis by actual potential users who made it very clear that without charging for the product it had a big perception of value problem.
I suspect direct to consumer products can have the same issue, but that the price point might be more competitive in forcing the price near free. All I can say is that for me, charging the right price for the product/service is the way to go if you product actually has an ROI. If it does not, then move on to something that does.
Our latest offering:JobsPro
I like what you have to say on the subject, Dharmesh. Most of all I'm excited that business models involving something other than advertising are starting to take hold again!
Interesting post. I feel that free is often the gateway to paid. If you offer something for free and people see the value in it, they will be happy to pay for additional value. This may not be the best strategy in all services/products. For instance, in the graphic design industry there is a lot of negative feedback on doing spec work for clients.
Great article. Of all the points, the one I wholeheartedly agree is #8 - "Today's Web entrepreneurs have to not just invent products that people love, but also those that they will pay for.”
If you are not solving a problem that people are willing to pay for, you don't stand a chance to make money - this has been time tested for years but our long term memories have been blurred by the success of a few - the YouTubes of the world - those who did not make a penny but managed to sell themselves out for billions. But for every one Youtube, there is probably at least a hundred failures of companies that did not create value.
The current economy is even less forgiving - your value proposition needs to be absolutely in the critical path of customers - one that lets them survive in the current economic climate.
I have always considered free products as lead generation or brand awareness tools - not something you would bet your business on. I have always looked at Twitter grader and the website grader this way - leads into the real product that Hubspot charges for.
Haven't visited in a while (my bad) but, this link caught my attention in Google Reader.
In the small business software market I think SMB's have grown accustomed to the "Search - Find - Try - Buy" model. Search for a service, find it, get to try it at no cost and then if they like it buy it. To convert website visitors effectively, "try" captures the lead and you have to have a compelling, hassle-free, value proposition for a business to try. Free trials, Free limited service offerings and Free service offers close the deal and give you an upsell opportunity.
Getting the users contact info (e-mail usually) requires something free because getting a buyer to take a credit card out of their wallet when they are browsing is just hard.
Please try our FREE trial :-)
couldn't help myself
I started to voice my concern over the culture of free in social media back in January (see: Sustainability of Social: The Financials
) and still wonder why more people aren't talking about it openly. It will be interesting to see if there is any reflection on the lack reasonable business models when cool services start shaking out.
A very good article on 'Free' system!
But the other side of the coin is that many of us go through thousands of such 'free' stuffs before we narrow down precisely upon the thing which we were looking for since ages!And maybe end up happily buying the product or the service, or still discovering something that we missed through out the liftime!!!