How is the Internet like a T-bone Steak?
Last Saturday night, my wife and I went out to dinner with some old and new friends to a great new restaurant in downtown Pittsburgh (The Capital Grille). I ordered the porcini mushroom crusted steak, a house specialty, medium rare, and we all drank a considerable amount of California red meritage wine. When I got the bill, which was split 4 ways with a stack of our credit cards, my mind immediately wandered to Internet Pricing.
Internet Pricing? After a fabulous meal? What gives? I thought, how is it that I — and many others — are willing to pay $30+ for a steak, which gives us pleasure for maybe 3 hours, and people are not willing to pay $30/year for a great Internet service.
That’s been a conundrum here at TalkShoe and many other Internet companies. We’ve spent almost $2 million on equipment, services, and engineers, and still our surveys and conversations show that only some people would pay for the service. Doesn’t the service have any value? Sure, it does. But people are just so used to getting free services online, that if you charge for something, they switch to an alternative. So we’re going the FREEMIUM route, which means we’ll give away a basic service for free, and charge for the premium version. Well — that’s the Internet!
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Not everyone is Google. We get it. But, if you make a superior product people will pay. What’s wrong with that business model? Freemium works, it creates passionate users, a stable base of support (open up a forum, the people that pay for the service are the ones answering all the questions – they pay to be your staff). Not everyone is willing to pay for a product, just the same reason not everyone uses a product for more than 1 week. I can think of about 12 sites I have accounts for and used less than an hour and abandoned (people like me are useless and a drain), yet they were “free” alternatives to a freemium site.
37 Signals has talked about this alot. All their products have a free version, but it does little to nothing, it almost doesn’t qualify to have the title “Freemium” They are going strong and just took their first round of investment. It works. It can generate lots of returns.