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Editor’s note:  With this post we wecome Doriano Carta to the WWD team. Doriano, better known as “Paisano” on Twitter and everywhere else online, has written for several blogs including Mashable, SarahLacy.com, PistachioConsulting and Chris Brogan’s Dadomatic.com where he is also the Editor-in-Chief. How much are […]

registerEditor’s note:  With this post we wecome Doriano Carta to the WWD team. Doriano, better known as “Paisano” on Twitter and everywhere else online, has written for several blogs including Mashable, SarahLacy.com, PistachioConsulting and Chris Brogan’s Dadomatic.com where he is also the Editor-in-Chief.

How much are you willing to pay for your favorite web apps and services? That’s the key question to which every app developer wants an answer. It seems as if the provider of every once-free service is now pondering ways to make money and extract revenue from their members, which makes sense when you consider that they are, after all, businesses.

Remember that old adage, you get what you pay for? Will we continue to see more of our favorite free services following this model of offering stripped down freemium accounts along with feature-rich premium plans? Will online advertising ever allow these sites to generate enough revenue to avoid going this route?

Proven Winners

Here are a couple of services that have found the right formula for success when it comes to charging their members. There might be some valuable lessons learned by examining these successful services to see how they managed to get their users to take out their wallets rather than their pitchforks and torches.
flickr_logo
Flickr was one of the first sites to capitalize on the fact that its members needed its services. They knew that people love their photos and they would be more than willing to pay a small fee for the convenience of storing and sharing their precious collections online. The paid accounts offered a few other bells and whistles, too, which only made the decision to pay easier.

evernote_logo

Evernote is another service that was clever enough to jump on a need it knew its members would pay for — storing notes and information in the cloud, and then having them accessible via the web from their desktop and mobile devices.

When the iPhone was released with its feeble notes app, Evernote swooped in with its own much more fully featured app, which allowed even more users to tap into their service, and thus into their wallets.

Contenders or Pretenders

Here are a few services that show promise as they venture into paid subscription territory from the freemium universe. They originally hooked their users with totally free service, and only later announced their membership plans. Time will tell if they made the right move.

jott

Jott emerged on the scene with an ambitious service that allowed its members to save their audio notes to the web via their mobile device. It also cross-posted to other services such as Twitter, Facebook and Remember the Milk. For the longest time it was free and in beta, then it announced its premium plans. There’s still a free plan but it’s extremely limited. Many members opted out, but many of them stuck around for one of the new paid plans.

box_logo
Box
also enticed members with free online storage but then later added premium plans with greater features such as larger file size for uploads (25 MB vs 1 GB, for example) and much more storage space (1 GB for free accounts vs. 30 GB for Business accounts).

While there are a slew of online storage services comparable to box.net (including some free ones with much larger storage), Box has wisely continued to innovate and has released many new features and options to make its service stand out. For example, its ability to work with your desktop applications as well as mobile devices is very handy. It has also released its own online apps to create documents and save them directly to your account.

dropbox

Dropbox is another online storage service. It’s similar to Box but it does things a little differently. It provides the ability to automatically synchronize your files from multiple computers and provides twice the space of box.net for free accounts (2 GB). It also has premium accounts for far greater amounts of data.

Services That Will Start Charging Someday

hulu_logo

Hulu is extremely popular these days. It remains free, but look for it to trot out some premium services soon. The companies behind it, NBC and ABC/Disney, are no slouches when it comes to making a buck, so hold on to your wallets. Clear signs of its financial plans is the way it has thwarted boxee’s attempts to share its content with its user base. The message is “No pay, no play”.
twitter-logo
Yes, even the red-hot popular media darling Twitter has been struggling with the subject matter of monetization. Its difficulties with discovering a way to make money have been analyzed to death by countless financial experts and business gurus. It has looked at charging users for premium services, implementing advertisements and charging third party services for access to its API. Ultimately, no one knows how Twitter will cash in on all of its recent media coverage. No matter what it does, they will become the perfect case study in courses for future web entrepreneurs.

Final Thoughts

Ultimately, most sites will fail if they aren’t careful when it comes to charging for their services. Recession or not, there are only so many services anyone can pay for, no matter how slick the interface or how many bells and whistles they offer. However, they also need to conduct themselves as a business and find a way to pay the bills.  At the end of the day, it’s always going to come down to a question quality of service and quantity of need.

Do you use mostly free services, or mostly pay? What factors help convince you that a service is in fact worth paying for?

  1. I use a combination. I try to start off with free versions to make sure they work for me on several levels – like how it feels, do I really incorporate it into my work, does it help me do something better.

    If it has a more direct impact on my bottom line, I’ll pay for it, but then again it has to be within my budget and I can only pay for so many. I’d say I pay for 20% and 70% are free with the last 10% being “donation based.” I do my best to donate appropriately to the donation-based ones.

    Example of my apps breakdown: Paying $28/month for 5pm project mgt; not paying for Skitch but use it all the time & couldn’t live without it; donate a few times a year to Neo Office and use it in lieu of all Microsoft products.

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  2. I’ve never paid for the services of a site, and I don’t think I ever will, unless every site starts charging and there is nowhere else to turn.

    I could see myself paying for something like Hulu, were it available in my country, as it does really have a monopoly. It is so damn difficult to watch House properly anywhere else on the internet, apart from Megavideo, another service I’d consider paying for.

    Other services like Twitter or Facebook, I feel, just don’t offer me anything I can’t get elsewhere for my money. So unless they do bring out some truly remarkable premium services, they’ll not be getting my cash.

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  3. [...] Are the Free Lunch Days Over for Web Apps? [...]

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  4. I’m similar to Aliza. I’m much more likely to pay for something that affects my bottom line. That being said, there are many sites I wish I could pay to remove the ads. I believe paying for services on the web is the best way to encourage innovation.

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  5. Short answer: no. People just do not understand that if the marginal cost of an item is zero, the price of it will trend towards zero. This is inescapable. The economics are such that charging for a zero cost item will always attract new entrants who can and will charge zero.

    The basic model is that a full-featured but basic offering will be offered as a (barely) loss-leader with a clear paid upgrade path.

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  6. The internet has always been by-and-large a resource for free stuff. How many people do you know who have a subscription to JSTOR, the online academic journal catalog? How many people do you know who have a subscription to a pay-porn site. Only the techn illiterate idiots pay for porn, ie- a bunch of middle aged american men. People will punch in their credit card numbers to buy physical goods online all day, but you can forget about any of us paying for facebook. …OK- bad example. Some people would kill for that. But yeah, F the bozos who want to try to make millions off web-services. Anybody remember the 90′s? Dot-com bubble? Yeah, good luck with that, smart-guy.

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  7. I mostly use free services but I do pay for some. If they are very useful and I really need the premium services they offer I will pay. The main services I pay for right now though are flickr and OtherInbox.

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  8. I have thought of this question recently at
    Can ads continue to fund the boom of Web 2.0?

    I see the trend where people will use the basic service for free and have to pay for the premium value-added services.

    In order for web apps to collect payment, 2 things are essential.

    1) There is something to anchor people to the service (e.g their friends, or the data) such that they don’t find it worthwhile to migrate to another free service

    2) Micropayments need to be convenient. I see Apple iTunes Store as a successful model for this.

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  9. [...] Are the Free Lunch Days Over for Web Apps? – Doriano Carta Interessante vraag natuurlijk: betalen we straks een (klein) bedrag voor web services die nu als vanzelfsprekend nog gratis zijn. Lastig te voorspellen. Persoonlijk denk ik dat de grote meerderheid van het aanbod gratis zal blijven, al dan niet voorzien van de nodige reclame. Gebruikers zijn zo gewend niets te hoeven betalen, dat ze dat ook niet snel meer van plan zijn alsnog te doen denk ik. Of gewoon op zoek gaan naar iets anders. Uit eigen ervaring kan ik melden dat sinds Last.FM niet meer gratis is, ik naar volle tevredenheid overgestapt ben naar Grooveshark.com [...]

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