Who wants to buy the cow when they get the milk for free?
Apparently I do, because I recently upgraded my Evernote account to premium, officially taking my first step into the cow-buying-after-free-milk-getting realm of online startups.
That got me thinking about the whole idea of monetization of online services in an increasingly accessible world. With so many mobile apps and networks out there, companies have to ask themselves more and more if and what to charge for their services.
On one hand, having a free service means there's no risk for people curious to try it out. And the more people you have actually trying the service, the better the chance that they'll adopt it for the long-term. But on the other hand, free services have a harder time making money. Sure, you can sell ad space, but you run the risk of diluting the experience for the user and losing that adoption rate.
I remember seeing a study back in July that showed the percentage of people who would be willing to pay for Twitter should they stop offering the service for free: 0%. I know we're dealing with some complex statistics here, so I'll break those numbers down: Nobody is willing to pay for Twitter.
Sarcasm aside, that study did provide an important lesson for startups. Given the same features and relatively same user experience, users are not willing to start paying for a service they already had access to for free.
That's why I like this emerging trend of the freemium service, where a startup offers a basic version of their service for free but has upgradeable options. There was an article recently about Evernote's freemium business model and how the free note-taking service is now a $10 million dollar business.
For developers and investors, stories like this are great because it shows there is indeed a market for online services, even if they're offered for free. For consumers, it's great because that means we should continue to see innovative services.
The biggest takeaway from all of this is that if people really like the milk, they'll be willing to buy the cow either way.
