Don’t Make Your Product Free. Charge for it!
Posted by Nick O'Neill on March 25th, 2008 3:50 PMWhoa, that was a creative idea. I’m thinking to myself as I watch yet another person on YouTube come up with an entertaining and interesting idea. Everyday we view engaging content that takes time out of our day and helps us temporarily escape the harsh realities of this world (well at least harsh for some). While watching this engaging content we think to ourselves, “wow, I could do that!” This moment is critical to determining and justifying the following months and often years of our lives (at least for many entrepreneurs).
Justin.tv was one of these ideas for a number of people. They were the beginning of the recent wave of lifecasting services including Ustream.tv, Mogulus and a number of other video services. Overnight, the business plan that we believed was going to make us millionaires dissolves before our eyes as we see a new competitor enter the market with more funding, a better board and significant media coverage.
Everyday I have another person contact me with their “brilliant” idea that will make them fortunes. All they need is to launch their new free service that they will begin charging for 6-months down the road. Competition is harsh and without an extremely catchy idea or a serious team of advisors it will be practically impossible for most people to build something substantial.
Conversely, now is one of the few times in history where a few thousand dollars can get your product out the door and tested by the market. Today, Michael Learmonth posted about Mogulus and how their new revenue model is charging people. Brilliant! Charging people for a service is something that has apparently alluded many dreamers.
Rather than chasing after becoming the next Facebook or Google, it’s soooooooo much easier to start charging for your service. The funny thing is that charging for your service actually differentiates you from the rest of the pack on the social web. As I told one person today, you can charge for your service or go out and chase for investment money. The latter is a great idea if you are a good salesperson and well connected. For the rest, charge for your service!
Even if you are somehow able to talk an angel investor into writing you a check for $250k or even $1 million, not figuring out who your actual client is will kill your business. There are very few services that can run for free (or ad supported) and expecting yours to be that one is not a great idea. Then again many of my ideas are ad supported but hey, I’m one of the few that can make it, right? 
Maybe I should rephrase my statement. If you don’t have a revenue model for your business, don’t bet your life on it. Figure out a way to make money while building your free service, otherwise you may just end up broke. Entrepreneurship is not about risking it all, it’s about taking smart risks. What do you think? Should startups charge for their services?
March 25th, 2008 at 3:52 pm
That’s actually a really good business model because simple advertising is not cutting it anymore. There is more out there than just advertising and it’s coming down to what you can offer that people are willing to pay for.
Create a great service, but don’t give it away for free — people may not value it as highly.
March 25th, 2008 at 3:58 pm
It’s refreshing, and somewhat ironic to read this. Before this whole web “revolution” took place, it was quite normal for businesses to charge for their products. As a matter of fact, it was the only way to do things. Now it seems that we’re coming back to that practice. I can’t help but smile. Who’d have thought, right? You pay for a service that you enjoy using… How novel!
March 25th, 2008 at 4:02 pm
Brilliant way to deal with spam and those content consumers. Of course if the service isn’t valued enough the content creators won’t pay.
March 25th, 2008 at 5:19 pm
I was very happy to read this article. It seems that during the rise of web 2.0, people have thrown out conventional business models and tossed their products into the mix for anyone to use. Many have become very wealthy on this model, but it is going to be hard to maintain. I love free services, but if there’s something that I really want to use, why not pay?
March 25th, 2008 at 7:25 pm
Just when i thought that “$0.00 is the future of business” (yeah right!).
Thoughtful post.
March 26th, 2008 at 9:28 am
Its a refreshing view in this era of free economy, and definitely a great advice for entrepreneurs to be more careful about their “customers” !
March 26th, 2008 at 12:07 pm
Though I agree with the premise, if you build it and they want it, they will pay for it, (within reason). One issue tho, as I recall (since I was an early devotee) I remember Ustream actually being out before Justin, inparticular witht thier free, come one come all policy!
April 4th, 2008 at 3:53 pm
[…] extremely challenging because you are competing heavily just to make enough to get by. Eventually you need to charge for something though. A few lucky individuals (who are also the hustlers in society), are able to generate a […]
April 21st, 2008 at 12:32 pm
[…] So the title of this post may be misleading because Six Apart was already making money. What the acquisition of Apperceptive highlights is that helping corporations navigate the social media and social technology space is extremely valuable. It’s also a straight-forward way to generating revenue. Back in March I said, “Don’t Make Your Product Free. Charge for it!“. […]