In one of my previous posts I talked about why free is not a viable business model. With every Web2.0 business based on free model, can anyone hope to charge for services? The answer comes from an essay by Gordon Crovitz, on online news media pricing:
For years, publishers and editors have asked the wrong question: Will people pay to access my newspaper content on the Web? The right question is: What kind of journalism can my staff produce that is different and valuable enough that people will pay for it online?
Applying this to Web based businesses, which for some reason are looking at their marginal cost of production ($0.00) to price their offering, “It is not what it costs a marketer to produce or whether people will pay for your service but does their service add unique value that is not available for a lower price anywhere else?”
Of course this depends on whether people who recognize the value are still willing to pay for it even though no such service is available elsewhere. That depends on whether or not the marketer gave it away for free in the beginning and is now trying to move from a free to fee model. If you had trained your customer by giving them your service for free it is not going to be easy to switch them to a fee model.
So why not charge them from the beginning? Why worry about freemium/ freeconomics and building users base? Why invent complicated schemes based on growing mind share?
The truth is simpler: People are happy to pay for news and information however it’s delivered, but only if it has real, differentiated value.
True for any online service.
For related discussion on this see a post by Peg Corwin in her Score Chicago blog. She discusses Chris Anderson’s model and the proposal by Walter Isaacson on newpaper.
See also a case for Unbundled Wall Street Journal in my Unbundling blog.