Why not try charging a fee?

Tara Hunt, “saddened by the recent news of a whole bunch of brilliant entrepreneurs throwing in the towel because they are out of money”, has written a great rant on why she’s “always been against offering web apps for absolutely free.” She argues that “free” is still met with apprehension and I have to say I completely agree with her. She’s also spot on when she says that even Google has trouble getting adoption on their free products. After you decide to charge for your web product, it’s imperative to have the right pricing structure. Here’s a great example:

Check out Basecamp to see pricing done right. Notice how they offer a free version which sucks you in and gains your time and loyalty. You can upgrade and downgrade at any time, and the pricing is reasonable for small business. Flickr has a similar approach for photographers, offering more storage and features for a fee. Both of these services have something in common; they both target a niche and provide a simple and strikingly effective product. Charging for a crappy product will never fly, so in the end, the strength of your product will determine whether or not people buy.

It’s also important to know when you shouldn’t charge for a product. If I were creating a competitor to Craigslist (which targets the masses), there’s no way I could compete with them by charging since they have already set the standard by providing mostly free services. The only people they charge are businesses who can write off the expense.

The benefit of charging for a great product is clear; it gives you the capital you need to stay afloat and remain competitive. This is the sole reason why Google is so huge today. They found a way to make money with their search technology, and it gave them the ultimate competitive edge. Being profitable helps them go from strength to strength and take on entrenched players.

As Tara points out:

Whipping out the credit card is easy when you find something really valuable. Other than Blogger, I pay the premium for every other service I used regularly (or expect to down the line).