Managing and processing the billing can be a challenge, however, and while some invoicing services do provide basic recurring billing featured, the functionality tends to be limited, and the process daunting. Chargify, a new hosted payment processing solution, hopes to change that by providing an easy way for companies to implement recurring billing.

Unlike Paypal or many of the invoicing apps we all know and love, Chargify lets you tie this subscription and billing process to your own signup page, with your own products and plans. Alternatively, you can create a hosted signup page and let Chargify handle the whole process. The more technically-minded folks can integrate the service with their own app or website via the API.

Chargify is primarily designed for subscription services, and the options available for setting up your various products and plans are extensive. You can include setup fees, free trial periods and expiration periods to customize your plans and pricing.

Setup isn’t a horribly complicated process, but there are a lot of options, and you obviously want to verify that the billing process is working using the test gateways before you start collecting and processing payments with live cards. A dashboard gives you up-to-the-minute views of revenues collected and a slew of useful reports.

Chargify doesn’t replace your merchant account and gateway, but rather supplements them, providing additional functionality including analytics, payment and credit card expiration reminders, metered billing and coupons and discounts.

Using Chargify doesn’t exclude you from paying the standard processing fees that you normally would incur from your merchant account and gateway. It does, however, let you choose among different processors to take advantage of the one that is giving you the best rates.

One of the concerns that a lot of freelancers and small businesses have is how to manage and process payments, and how to handle the risks associated with storing credit card information. In this instance, neither you nor Chargify actually store the credit card data, it all goes through Authorize.net, which is fully PCI Compliant.

I’ve focused primarily on using Chargify in a small business environment but it can also be used by developers who are looking to add payment functionality to their applications without wanting to build a solution from scratch.

Chargify plans vary in cost, depending on your requirements. For small shops selling hosting or recurring services, your first 50 paying customers can be managed for free. The jump to the next level is a bit pricey at $49 month, but supports up to 500 customers, while additional plans for larger accounts are also available. Each level also includes 1000 non-paying customers; useful if your business has a corresponding free plan or “freemium” model.

What tools do you use to handle recurring billing?

Related GigaOM Pro content (sub. req.): Enabling the Web Work Revolution

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 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 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 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 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 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 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”.

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?

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