Blog Post

Are the Free Lunch Days Over for Web Apps?

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,, PistachioConsulting and Chris Brogan’s 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 (s yhoo) 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 (s aapl) 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.

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 (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 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 (s ge) and ABC/Disney (s dis), 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?

17 Responses to “Are the Free Lunch Days Over for Web Apps?”

  1. kateofficelivecares

    It will certainly be interesting to see how everyone fares. In the meantime however, lots of apps are still totally free. Microsoft Office Live Workspace offers you the ability to create, save, access, and share documents and files online for free (5GB of space!). There is even a plug-in for MS Office that lets you save your files to your online Workspace directly from whichever Office program you are using. That way, it automatically backs up your files online, and you can simply access them from any other computer with internet access.
    MSFT Office Live Outreach Team

  2. I have been struggling with how to make some income off the 2 stock market sites I write. I have a small but dedicated readership, not big enough to make advertising pay. I am working to make some of the content subscription based and keep some free. The challenge is how much free and how to attract subscriptions. Advertising is not a factor for a small online publisher/writer that wants to earn something from their content.

  3. You could have included SmugMug in the success stories as well. They have a very solid and profitable business model. People don’t mind paying for a service that is really stellar. Most of these fit that thought very well. Good hypothesis, solid article.

  4. TripIt just announced a Pro version which makes a great deal of sense. They offer a valuable service for travelers who are more than willing to pay a little something extra for some special new features.
    Another great example of how to do it right. Offer a needed service in an easy to use interface for free to prove what you can do then release a pro version with extra perks.

  5. I would gladly pay for an online hub that gave me a personalized site that did everything I need – think e-mail, storage, connections, writing, RSS, “tweets”, etc. It’s what Google’s building and they won’t be the only one. Eventually, there will be a handful of big providers that will integrate nicely but have specific traits, benefits and styles. Can’t wait.

  6. 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.

  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.

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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.