Monetizing Your WebApp – Charging A Price March 11th, 2009
Here is a thought, if you are afraid to charge for your product, how good is it really? I came across a fascinating video recently, from David Hansson, a 37 Signals man, and founder/developer of Ruby On Rails. It was like a cold Corona and lime on a hot day, exactly what I needed.
Perhaps there is some narcissism in my thoughts here, I had had a variety of similar thoughts (however, not with his eloquence), and to hear someone of such stature pontificate them was energizing. Such words! I watched it twice, enthralled by actual business savvy. Let´s break down some major points:
- Charge a price for your product.
Alright, that out of the way, what does it mean? Well, he seemed to refute both the free and freemium model, showing off the 37 Signals pricing outline, which gives you a month free but has no free option. I have long been an advocate of freemium, often on this blog, so to have that be set aside was surprising to myself, until he began to discuss scaling problems.
He pulled up a little chart that showed revenue per server versus load when you have no free customers. With no dead weight, each server pays for itself in a major way. Also, by charging for each customer, you lower churn rates, and limit overall growth. In other words, you will not crash when you launch. You will not have scaling problems a la Twitter. Sounds nice, right? But, with a price, things are different. Most likely, an overnight viral success is outside the realm of possibility. Also, your product has to be much better. To accrete users that pay, is easily ten times harder than accumulating free users.
But if you have a good product, you shouldcharge for it. With all the hard work and sweat that you have poured into building your shiny new thing, you should be able to have your users pick up the server tab. The internet is not a charity. Especially, not one that we should be forced to run ourselves.
So, to developers, charge! To users, pay!
Posted in Uncategorized | Comments (1)
March 11th, 2009 at 11:45 am
Thanks for sharing the video – I really enjoyed it too. The argument about the odds of success where also very persuasive. I think the key point from this is that when you have a product you know if it is any good when people reach into their pockets to access it. Its easier to get that sense of real traction rather then perceived traction that free sign ups give.
I think these trends will be the way forward for 2009/10:
- niche not mass market
- tapered financial expectations
- higher quality/user value
This is also supported by a good post by Alexander van Elsas:
http://vanelsas.wordpress.com/2009/02/25/the-network-effect-in-web-20-is-also-its-biggest-tragedy/
It’s SAAS for me from now on!!!