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Why Free Plans Don’t Work

softwarebyrob.com

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Re: Why Free Plans Don’t Work

#101

Post by shadowsun7 »

revorad wrote: post #41
shadowsun7 wrote: post #26

I loved this article, but after thinking about it for a bit I realize that there is an argument for going free. Two pretty strong ones, in fact. 1) If you want to get acquired - and we're talking about a big acquisition here - it would do to go free so you manage to score a big-enough user base to get noticed. And so the bigger company is interested in acquiring you not only for your technology, but also for your use…

Going free also makes sense if you want total market dominance. In which case, free is really the only way to go. No it's not. The other way is to make the best damn product in the market. I hate to give cliched examples, but since we are talking market dominance, see Windows, Adsense and iPod.

Not always true, though. History is littered with examples of products that gained traction not because they were better, but because they were free. (See: BIND vs Jeeves, Stanford's Unix vs Berkeley's Unix, Minix vs Linux, Apache vs Microsoft/Netscape)

At one point in all these product's lives they were lousier and smaller as compared to their competitors. But they won out because the low barrier to adoption (read: free) drove usage, and from usage, more improvements.

Re: Why Free Plans Don’t Work

#102

Post by hasenj »

gnaritas wrote: post #76
daleharvey wrote: post #60

Earlier quoted context omitted.

I much much much prefer desktop linux, I would hesitate to call windows decent, let alone by far the best. Yet I have still found it as much as impossible to buy a computer without windows preinstalled.

> I much much much prefer desktop linux So do I, but that Linux didn't exist when Windows became dominant; it came much later.

and even now, it lacks the beauty of OS X, which is rather unfortunate.

I use Xubuntu, and it's the best damn work station I've ever used, but sometimes I wish gtk apps were a bit more beautiful.

Re: Why Free Plans Don’t Work

#103

Post by shantanubala »

VBprogrammer wrote: post #68

I feel this really should have been titled "Why My Free Plan Didn’t Work." Since free plans have and will continue to work for some people. I don't know about you but I doubt GitHub would have taken off had it been exclusively pay-ware. Even if it did gain some traction someone would have made a free with upgrade option version of it.

The main thing with GitHub that makes it a great example of freemium is that they have two separate audiences for free and paid accounts. The free accounts are for open source projects and random hackers who write code for fun. By doing this, they attract talent and popularity to their service that convinces a different audience (businesses) to pay.

GitHub probably still has many more free than paid users, but the upfront cost was probably well worth it in the end.

Re: Why Free Plans Don’t Work

#104

Post by slug »

revorad wrote: post #93
damoncali wrote: post #83

Earlier quoted context omitted.

Windows won because DOS was already everywhere. It wasn't the best product. I would argue OS/2 and Macintosh were pretty significantly better. It's not a coincidence that it took this long (Windows 7) for MS to produce a decent operating system - they are now having to compete on quality. But you don't even have to buy the argument that Windows was sub-par. It doesn't matter, because that's not why MS won. Just as MS…

Of course, Microsoft used DOS to push Windows and perhaps OS/2 was better in some ways, but the Wikipedia article suggests OS/2 lost because Windows was better in some important ways. The collaboration between IBM and Microsoft unraveled in 1990, between the releases of Windows 3.0 and OS/2 1.3. Initially, at least publicly, Microsoft continued to insist the future belonged to OS/2. Steve Ballmer of Microsoft even to…

There were other PC DOS, but MS had something up their sleeve: http://en.wikipedia.org/wiki/DR-DOS#Competition_from_Microso... and http://en.wikipedia.org/wiki/AARD_code

Re: Why Free Plans Don’t Work

#105

Post by SkyMarshal »

SkyMarshal wrote: post #90
revorad wrote: post #57

Earlier quoted context omitted.

What consumer OS on affordable computers (that leaves Macs out) was/is better than Windows? It took the court system to slow them down. That was not for their dominant desktop OS, it was for using their monopoly to push IE and server products. You can call out Microsoft on dodgy anti-competitive behaviour in some respects, but you cannot take away credit for building the solid product that is Windows. Heck, even now…

GEM OS was a contender too iirc.

Why the downvote?

http://en.wikipedia.org/wiki/Gary_Kildall#IBM_dealings

Re: Why Free Plans Don’t Work

#106

Post by revorad »

shadowsun7 wrote: post #101
revorad wrote: post #41

Earlier quoted context omitted.

Going free also makes sense if you want total market dominance. In which case, free is really the only way to go. No it's not. The other way is to make the best damn product in the market. I hate to give cliched examples, but since we are talking market dominance, see Windows, Adsense and iPod.

Not always true, though. History is littered with examples of products that gained traction not because they were better, but because they were free. (See: BIND vs Jeeves, Stanford's Unix vs Berkeley's Unix, Minix vs Linux, Apache vs Microsoft/Netscape) At one point in all these product's lives they were lousier and smaller as compared to their competitors. But they won out because the low barrier to adoption (read:…

Thanks for pointing those out, I hadn't thought of them and can perhaps be accused of survivorship bias. I don't know about the first two examples but isn't Linux actually better than Minix and Apache certainly better than Microsoft? In any case, this is a bit of an unfair comparison because these are examples of open source vs proprietary, not product quality primarily.

In the context of the OP's blog post, we are talking about winning in terms of building a profitable business, for which I believe building a good product and selling it is a better strategy than getting popular by giving away a crap product for free.

The gist of the matter is that you should be clear what you are selling:

* a product

* advertising space/lead generation (if you are free)

* yourself (acquisition)

I see most web startups are going for the second and third options, but it seems it is mostly out of fear and the status quo, not careful consideration of the pros and cons.

Re: Why Free Plans Don’t Work

#107

Post by revorad »

raquo wrote: post #97
revorad wrote: post #41

Earlier quoted context omitted.

Going free also makes sense if you want total market dominance. In which case, free is really the only way to go. No it's not. The other way is to make the best damn product in the market. I hate to give cliched examples, but since we are talking market dominance, see Windows, Adsense and iPod.

Windows was free (preinstalled) for end users since at least 3.0 IIRC. Adsense is essentially free for publishers. Both it and Adsense have huge positive network effects. Not to say that they weren't best products on the market when they got traction, but still.

Adsense is essentially free for publishers.

That's a strange way to look at it. Publishers are selling space to Google for a cut of the Adsense revenue. Google is selling contextual ads within those spaces to advertisers.

What's free in that?

Re: Why Free Plans Don’t Work

#109

Post by acabal »

My site uses a freemium model, and in some ways it kind of has to. The site is a social-network type site where writers critique each other's work. Members can join for free, but their accounts have lots of limitations that are lifted by paying a monthly fee.

For my site, the most important part is having active members, whether they're paying or not. If nobody is active on the site to critique writing, then new writers won't join. Having a pay barrier to joining a community like this one would very quickly strangle it.

Like most freemium plans, only a small percentage convert to a paid plan, but enough do to keep making it worthwhile. I even doubled the price of the paid plan at one point to see if it would affect conversions, and it didn't, so people are finding the model useful.

So freemium works for a model like mine; but for many web apps, especially ones where the customer sets-and-forgets it, it might not make as much sense.

Re: Why Free Plans Don’t Work

#110

Post by chmike »

krschultz wrote: post #49

Startups are too skiddish about charging. This shouldn't be novel or surprising, this is regular business 101. Businesses charge money for useful products. People are used to paying for useful products. The only difference is that the variable costs associated with hosting more users are tiny. How much does each user cost you? Basically nothing in the scheme of things. The problem is that the fixed costs are high - d…

The freemium model pertinence depends indeed on the free user cost. A service for which the cost in minimal (i.e. no support, low bandwidth or storage needs,...) for free users, could benefit from it as a marketing tool.

The perceived added value for paying users should be significant, obvious and justify the fee.

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