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The End of Free?

January 23, 2009 BY Mark Evans

Okay, I’m not suggesting that the buffet of free online services is going to disappear any time soon but there’s no doubt that being able charge people to use a service is becoming more of a necessary strategic issue for many companies.

Even Google – the King of Free – is starting to encourage people to pay $50 for Google Apps as opposed to two years ago when it declared the product was totally free.

Have the chickens finally home to roost? Has the Web 2.0 ecosystem finally realized that giving away your product for nothing makes little or no sense? It may have not come to that just yet but revenue – now know as the “R” word – is moving into the spotlight.

And we’re not talking about “freemium”; we’re talking about charging a price to use a service that’s useful.

2009 could go down as the year the Web got real when it came to embracing business models based in economic reality.

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  • http://faramarzhashemi.com Faramarz

    Frankly I think Google can afford to be more aggressive. Google Apps. has become a necessity for it’s users (for me and colleagues especially). They’re slowly entertaining the price schedule, seeing where the elasticity lies.

    But a startup who hasn’t reached ubiquity cannot afford to take this route and this route only.

  • http://www.productwiki.com/omar Omar

    Big companies are dropping their ad spending. Which means ad-supported companies are seeing their main source of revenue dry up.

    Therefore, some companies have no choice but to find alternative revenue streams.

    That doesn’t mean that advertising based models are broken. Just that you have to be smart with them… like with everything. Some companies went ad-based that shouldn’t, and some companies are going to move away from ad-based when they should keep them.

    Ad models were never about giving anything away for free. You’re selling a piece of the attention you have of the audience. Advertisers can pay good money for that.

  • http://web3skills.com Chris Schmitt

    The “secret” to a successful start-up:

    Step 1. Build a Great Service
    Step 2. ?
    Step 3. Make Money

    What’s step 2? Charge for your service. It’s a technique that’s worked for thousands of years.

    Ruthlessly stolen from:
    http://www.omnisio.com/startupschool08/david-heinemeier-hansson-at-startup-school-08

  • James

    People need to understand that these “free” services are nothing more than a means of advertising. Those who find these services valuable are probably willing to spend a few dollars to keep them, after the “promotion” period has ended.

    The norm today is for companies to provide online trials of their products for free in hopes that they will connect with those users who find the services valuable enough to warrant a purchase.

    In the case of Google, they were willing to advertise and promote their brand by providing free services.

    The remarkable aspect of this is the overall reduction of cost compared to the traditional software delivery and support model, which still leaves Microsoft behind the 8-ball.

  • http://wallen.typepad.com Wallen’s

    There is no doubt that the number of free product will decrease with the recession. Revenues are more important for sure. But I can only agree partially to your point of “Has the Web 2.0 ecosystem finally realized that giving away your product for nothing makes little or no sense?” It all depends of the marginal cost of serving users. If that is zero (or nearly) than it is a remarkable business model coupled with premium packages (i.e., freemium). If the marginal cost is way above zero then free might be a problem indeed in those days. For more details see my post a week ago.

  • http://www.lingq.com Mark Kaufmann

    I hope you’re right! We’re certainly moving in that direction.

  • http://blog.agoracom.com AGORACOM – George

    Mark, just remember who stood up and banged the table about this first (inaugural Mesh Conference).

    Halle-friggin-lujah. Finally, the Web 2.0 ecosystem figured out that Silicon Valley, VC’s and TechCrunch are out to lunch when it comes to building online companies.

    The Greek

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