Always New Mistakes

April 8, 2008

Free as in Virus

Filed under: Business — Tags: , , , , — Alex Barrera @ 11:08 pm

I am writing this post as I’m flying over Tulsa on my way to San Francisco. This is my 10th hour of flight and I just realized something that many might think is stupid. During my transoceanic flight from Madrid to Atlanta I had free movies on board. The same goes for free earphones, free peanuts, free drinks or free cookies during the flight. While waiting for my connection at Atlanta I tried to use the airport’s wifi but, as I expected, you had to pay $7.50 for a 24h connection. On my current flight you have to pay to watch any movie ($6), you have to pay $2 to get some earphones and you have to pay if you want to eat some miserable cookies (you guessed, I didn’t pay for anything). Suddenly something has stricken me pretty hard and I know I’ve discussed this issue with some people (Say hi to Mark Evans!).
I’m so used to free services that I expect everything to be free. And mind me, that’s just wrong, very wrong. I just realized how wrong I am. $7.50 for a 24h Internet connection is very cheap for International Standards (specially if you have Euros as I do).

The problem here isn’t that some products are free of charge, the problem arises when you expect “everything” to be free. There are always exceptions to this, like the case of wifi at hotels. I still don’t get why after spending $150 per night in a hotel I don’t have free wifi. I truly believe wifi is accounted in the high price I pay for the room, but surprise, every single time I ask for wifi I have to pay some really expensive pluses.

Anyhow, many other things really deserve to be paid for. I do have a problem, I’ve never paid for a software product (ok, ok, Microsoft licenses maybe). As a programmer, anytime I needed something I tried to find a free alternative and/or code the extra functionality I needed. Although this is a cool way to save money, it does takes you much more time an effort. Not only that, most probably you won’t code a better software in just a couple of hours.

And so back to my point, I realized that I have to start learning to pay for services I use and like. My question is this: Is this the general evolution of market perception? Am I the only one realizing that an exclusive freemium world mentality is unsustainable? Will more people start realizing this and start shifting to pay per use models?

Now, more interestingly, what are the conditions a pay-per-use model needs to have to be used by a fairly large segment of a market? In my opinion, it needs to deliver two things:

  1. Create more value than their competitor’s free services (no surprise here)
  2. Get the users to understand why they should pay you for your service.

We need to really start stressing the importance of paid services as we do a horrible job at it. First of all, the value – price relation MUST be fair. Too expensive and users wont pay it, even if they like your product. Too few value and users won’t understand why they should pay you either. These concepts seem rather trivial but I have the feeling we should go back to basics with this issue.

Now that I think about it, I truly wonder if this business model is even valid anymore. Either we go back to basics with a new breed of paid models or we find a way to indirectly cash in thousands of users. Either way, I predict that true free services will die (except those that are under the umbrella of a company that can accept the looses). If that ever happens, I wonder if people will go back to paid services. You know, history is cyclic, maybe it’s time to get back to the “old” revenue model but with a nice 3.0 twist.

Now some questions for all the readers, under what circumstances would you pay for an online service? Would you consider a monthly fee, anual fee or a per usage fee? Any ideas and comments are greatly appreciated!

5 Comments »

  1. Interesting topic and a tough one to predict! I guess most of us will no pay whenever a similar free service is around.

    BUT as you point at the end of your post I think non-computer-geek-ppl need to realize that not all is free on the internet before it is too late. A good start are the on demand movie services.

    Maybe google is planning a free movie service in exchange for some ads, who knows…

    Comment by Gabriel Gonzalez — April 9, 2008 @ 7:08 am

  2. Alex,

    I hear you, brother. The big challenge is convincing people there’s enough value in something that it’s worth pay for. That’s tough when you have a paid product competing against something that’s free. If the free product is alright then getting someone to pay for more than alright is tough. For anyone trying to get people to pay for a product or service, you have to believe that in the long-run people will gravitate to quality – be it service quality, great customer service, etc. A good example is Web hosting. You can pay little or nothing but you usually get what you pay for.

    Mark

    Comment by buckpost — April 10, 2008 @ 4:31 pm

  3. Don’t get suckered into it. The pay to play mentality is obvious when you have to pay for bandwidth and hosting and phone service etc. The market is always driving a fee based economy but it doesn’t have to be that way. Cheap symmetric DSL connections would be a start. In Korea they have 50 MB/s symmetric DSL for cheap.

    Comment by Danyel Lawson — May 7, 2008 @ 3:44 pm

  4. Indeed, but cheap != free. You give it for free if you make money elsewhere. Right now that elsewhere are ad revenues, but that cow doesn’t has too much milk left plus it doesn’t works for all users.

    What I rave about is that we tend to think that everything should be free when that’s not the case. There are operational expenses that have to be payed for. What it’s true is that some services, like ADSL or cellphone providers might charge in excess. Something I agree with you🙂

    Comment by Alex Barrera — May 7, 2008 @ 3:56 pm

  5. Mark, you are very right. That’s why I think we should design payed services that become indispensable to the user. That way it’s not about quality, it’s about not being able to function in the same way without that product.

    Comment by Alex Barrera — May 7, 2008 @ 3:57 pm


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: