Tuesday, March 13, 2007

Paid v. Free v. Freemium and Company-wide Multi-tasking

A couple of blog posts that made me say "hmmmmm" last week:

Blog Post #1

Josh Kopleman of First Round Capital started a great conversation last week with this post. Here's the meat:
The truth is, scaling from $5 to $50 million is not the toughest part of a new venture - it's getting your users to pay you anything at all. The biggest gap in any venture is that between a service that is free and one that costs a penny. I can't think of a single premium service that has achieved truly viral distribution. Can you?
Since then, Anne from GigaOm, Jeremy, David, and others ave chimed in with their take on the matter. I've blogged too much about free v. paid v. freemium lately, so I'll just let you check out their stuff. I'd love to hear your thoughts on the matter.

Blog Post #2

Hummer Winblad's Will Price wrote a great piece on the tendency of entrepreneurs to make their companies "multi-task".

Many of the entrepreneurs that we work with struggle with this issue, and I'd be lying if I said that FundingUniverse hasn't fought the tenancy to become all things to all people. Sometimes it's tough to focus when you're out to change the world, but it's imperative to do so when manpower, capital and time are scarce. Find the business model that provides the shortest distance between launch and cash flow, and stick with it.

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Anonymous David Mullings said...

I am about to face this same issue with a website relaunch in a few months that tries to go from free video content hoping to be supported by advertisers to a subscription model where users pay.

My case study is IGN.com, a site that managed to convert 75,000 users into subscribers a couple years ago for the gaming portal that has turned into a lot more. I would suggest you take a look at their model as it has evolved quite well.

The key I believe was to tease site visitors with a bit of the content they would miss out on and show where the value-add was.

Once again I think we have been conditioned to focus on giving things away free to quickly build traffic, not realizing that the traffic will cause your costs to increase as well and advertisers don't magically appear to save the day. That at least has been my experience in streaming video.

11:09 AM  
Blogger JibberJobber Guy said...

I loved this post and went to the other posts that you reference... the difference between nothing and that penny is a lot, that's for sure.

My site has free/premium, and it has been interesting to see the psychology behind what you should pay for vs. what you should get for free.

Jason Alba
CEO - JibberJobber.com

3:19 PM  

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