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What Do You Pay For?
Editor’s note: This post originally appeared on CN last year. I thought it was worth sharing again as more startups test the waters of monetization models – especially the pro/paid option.
The web enables us to listen to music, watch tv shows and follow the latest news all without paying a cent. But while things are slowly but surely becoming free, I still believe people are willing to pay for certain value propositions.
I believe the following 5 things are uniquely profitable in a world of free:
1. Convenience
People are inherently lazy. If you make their lives easier, they will pay you for it.
There are several ways to listen or download music for free, yet people are still paying for songs via iTunes or amazon.com. Why? Because of how easy it is to find and download music on those sites. People value their time more than the 99 cents per download. If you make things convenient and easy people will pay.
2. Quality
Price ensures a more serious and interested clientele. There are many online forums that are free (i.e. Sitepoint, DPreview), but there are also a handful you need to pay for to access (i.e. Webmasterworld, SomethingAwful, metafilter). I believe the reason people are willing to pay for those online communities is because the quality of the content is better. There is a higher signal to noise ratio. This same premise applies to dating sites. People will pay for membership to online dating sites, as opposed to finding dates through any number of free social networks.
3. Additional Functionality
Many websites give consumers just enough services to whet their pallets, and then charge for more functionality or more services, also called the "freemium model." Notable examples include the 37 Signals‘ product offering, Flickr’s Pro Account, and Skype.
4. Customization
Wordpress.com is a great example of this. They provide anyone the ability to have their own personal blog for free however they charge for the ability to customize the CSS or a the blogs domain name for additional fees. Smugmug is another example.
5. Privacy
People still value keeping their private information private. To protect their identity people are willing to pay GoDaddy an extra fee when registering a domain name to ensure the address remains undisclosed.
What do you value enough that you are willing to open your wallet for?
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Note 1: I would like to delve into this further and have proposed a talk for next year’s SXSW conference on this topic. If this discussion is of interest to you, I welcome any feedback and would appreciate your vote.
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Kevin Kelly, Wired Magazine’s cofounder, has a really great list of attributes he asserts are "better than free." These qualities people will pay for in a digital age and include:
1. Immediacy
2. Personalization
3. Interpretation
4. Authenticity
5. Accessibility
6. Embodiment
7. Patronage
8. Findability
I asked my twitter followers and received some interesting suggestions:
* accessibility
* silence
* beauty
* freedom
* peace of mind
* respect
* attention
Any other ideas?
This column was provided by Michael Galpert, co-founder of NY-based Aviary. Aviary is a suite of rich internet applications geared for artists of all genres.
[...] this year Michael Galpert looked at what type of products and services we are willing to pay for. I think website creation tools are [...]
Really thought provoking article Michael – especially the iTunes part!
Michael’s commentary and vision is always sharp. This is some high quality stuff.
Thanks for the kind words all.
Good post! The inherently lazy made me laugh. That’s totally me with iTunes. Even if I can get a song cheaper elsewhere, I won’t because it will take too much effort, with the exception of free of course. I download free songs on MySpace or iLike for artists I Iike and who offer free downloads. But if I have to pay, forget it, I just use iTunes because it’s a simple click and I’m done.
I agree on the other ones, too. We may want everything for free these days, but every now and then we do pay when we feel there’s a value proposition.
I really favor the opposite opinion. I guess the scenario will become similar to supermarkets and luxury goods, there will not be much space in between. Ease of distribution is a key characteristic of the internet and user generated content is just at the beginning. Think about phone cams. Free offers are key means and a strategy to reach a critical mass. Something I personally may pay for is comfort and convenience e.g. a paid wireless service instead of an ad supported.
I’ll pay for necessity, which in this context is very similar to certainty.
Gmail is great but, there’s no guarantee it’ll always be available, no guarantee it’ll always be free, and no guarantee that one of their robots won’t one day decide that I’ve done something wrong and lock me out of all my Google accounts. Email is a necessity, so I pay for a domain and hosting with SLA, and I back up all my Gmail via POP.
Skype is fantastic and convenient, but their service has not always been terribly reliable, and access to Skype also depends on the availability of my Internet connection. So, although nowadays I hate making phone calls where I can’t easily IM a link or a picture at the same time, I’m not going to depend on Skype’s flakiness and growing pains for my home phone which has had a total outage tally of 1 or 2 hours in the 7 years I’ve been living at this address. I’ll pay for the near-certainty of my land-line until some VoIP provider has a good solid track record of stability.
That lack of certainty is also what keeps me from buying music from iTunes Music Store. Maybe it’s an old-fashioned “bits v. atoms” thing, but DRM takes from me the ability to protect what I have purchased from unilateral rule-changes. (Like those at Yahoo Music, Sony & Microsoft, too.) And with the availability of DRM-free Amazon Music and eMusic and plenty of other places to purchase digital music without having to pick my butt up from my chair, ITMS isn’t that much more convenient that it’s worth paying a premium for their DRM-free stuff.