A radical business plan for start-ups: Charge people.

http://www.slate.com/id/2203436/

by fmanjoo • 18 years ago

29 39 18 years ago

slate.com

run4yourlives5• 18 years ago

I can only speak for myself, but I wouldn't pay for facebook.

swdesignguy• 18 years ago

I would pay for Twitter. If enough of my friends did.

run4yourlives5• 18 years ago

I don't use twitter now.

eru• 18 years ago

Providing public goods by profit seeking entrepreneurs: http://mason.gmu.edu/~atabarro/PrivateProvision.pdf

ryanwaggoner• 18 years ago

But would 5% of their users? I could see that.

unalone• 18 years ago

I would. I like that Facebook works perfectly without messing things up. I'd pay to keep a site like that afloat.

run4yourlives5• 18 years ago

That conversion rate is as wishful as thinking Facebook can survive without an income. 2% would be outstanding, IMO.

tom_rath• 18 years ago

If only 5% of your Facebook network existed, would you use (let alone pay for) Facebook?

nradov• 18 years ago

That sounds a lot like classic "Chinese marketing" that a lot of companies first tried when China opened up for foreign business. There are a billion people in China, so all we have to do is sign up 1% of them as paying customers and we'll be rich! Anyone can get 1% market share, right?

Of course it turns out that didn't actually work for most of the companies who tried. There has to be some kind of specific value proposition or you won't get even 1% of any market.

snprbob862• 18 years ago

I've put some serious thought to the question "How much is a Facebook account worth?"

Clearly, there must be a free account available because it wouldn't be worth a penny if it didn't have as many users as it did. So I re-framed the question as "What parts of Facebook are worth a premium?" as well as "What parts of Facebook would I pay for?"

Unfortunately, the list is pretty short. I used to use Facebook a lot during college, but now I use it for the occasional info or photo lookup. When I'm bored waiting/traveling/etc, I will usually whip out my iPhone and comment on a bunch of feed items and that's always worth a few laughs. But would I pay for that? I just really can't see myself needing it badly enough.

What "advanced" or "premium" features do all of you use? What would you pay for those features?

thorax• 18 years ago

Out of curiosity, if it disappeared tomorrow, how much would you pay to get it back?

("Sorry guys, we can't afford it anymore! We need people to chip in $1 each a month or we have to shut down. These friends of yours have already agreed to stick around: XXX, YYY, ZZZZ")

potatolicious• 18 years ago

The problem with what the article suggests is that the penalty for not paying is the destruction of the usefulness of the service, that's unacceptable.

People log in to facebook precisely because people do 10 status updates a day, and post an ungodly number of notes, and join a ridiculous number of groups. If you restrict these, even if some people are willing to pay, the network is no longer compelling, and usage will drop, and you send yourself into a death spiral.

Clearly facebook's monetization does not lie in charging for an account, that is IMHO one of the dumbest ideas I've ever heard.

Oh, and the author is completely off his rocker if he thinks you can get 5% of people to subscribe to a pay-facebook. Think 1%, max.

jncraton• 18 years ago

I can only speak for myself, but I don't use facebook even though it's free. I don't particularly need gratuitously large social networks made up largely of people I don't really know. Sites like facebook, reddit, and even this one to a much lesser degree mostly just distract me from getting things done at the computer.

pmjordan2• 18 years ago

When people ask me why I'm not on Facebook, I usually tell them that Facebook is like a really high-maintenance girlfriend without the upsides. Twitter is the only "social network" (if you can quite call it that) I'm prepared to use, mostly because it's so loose and informal. I hope it stays that way. I hope the "Hot Political Topics" bar isn't a sign of future feature creep that plagues other sites. (I'm not even in the US, why can't I turn the damn thing off?)

As for whether I'd pay for Twitter: yes, if all the people who use it now continued to use it. Unfortunately, charging for it would almost certainly cause a lot of them to leave, reducing its value - which would lead to a vicious cycle. I think this is the main problem with monetising social networks that aren't targeted directly at who are prepared to pay from the outset.

Freemium is probably the way to go. The trick is finding a sufficient set of value-adding features, ideally introduced immediately as a premium option. Nobody likes to pay for something that used to be free. Of course, if it was easy, they'd already be doing it.

orib• 18 years ago

I use it, but only because it mails me notifications about events. If my non-technical friends understood mailing lists, and enough of them were on the same one, that would easily beat facebook for it's primary usecase (at least in my situation)

moses1400• 18 years ago

I wouldnt pay for facebook either, linkedin maybe.

helveticaman• 18 years ago

>Hansson calls this the neighborhood Italian restaurant model of Web commerce: It's a lot easier to start a nice neighborhood restaurant than it is to start the best Italian restaurant in the world (the Google of restaurants). But just like their bigger brothers, neighborhood Italian restaurants make money. Sure, they don't make as much as the best restaurants in the world, but they do well enough—and it's not nearly as much of a headache to run a neighborhood restaurant as it is to run a place where investors, critics, and the world's press are breathing down your neck.

This metaphor is bad. On the internet, there can't really be that many Italian restaurants because there are no local monopolies and no marginal costs.* On the internet, there would only be one Italian restaurant, and it would be 37 signals.

*Sure, there's the speed of light and the cost of electricity, but these are not strongly limiting factors.

cglee• 18 years ago

Isn't this what the 'long tail' is about? Online, your 'neighborhoods' are demographic niches.

Now, if the needs of your online 'neighborhood' have already been met, then that's similar to living in a neighborhood full of Italian immigrants and still looking to start an Italian restaurant nearby. You'll have to move and learn about the needs of other 'neighborhoods'.

mlinsey• 18 years ago

Many people (including Eric Schmidt in a submission that was posted earlier this week, although I've certainly heard it before) argue that the Internet follows more of a Zipf's Law distribution (http://en.wikipedia.org/wiki/Zipfs_law) than a "long tail". In other words, the bulk of the traffic and therefore the revenue is in the head. As a corollary, the Internet doesn't get rid of celebrities, it creates bigger celebrities.

daniel-cussen• 18 years ago

True. Maybe the metaphor was apt. At any rate, we can all agree that there are quite a few niches that are a little cramped.

mixmax• 18 years ago

That's the common wisdom yes, but is it true?

If you have a business that depends on Metcalfes law (the value of a network is proportional to the square of the number of connected users of the system) then yes you need to get big fast and become the market leader.

But for many other types of business this is simply not true. To take 37signals as an example there are plenty of players in their market, probably thousands that are turning a tidy profit. I can name a few just off the top of my head.

run4yourlives5• 18 years ago

A neighborhood of billions has more than enough room for many Italian restaurants.

That same neighborhood sometimes wants Chinese, or Greek etc, etc.

Given those two statements, and the sheer numbers on the internet, it will be a long time indeed before we reach the limits you talk about.

That being said, if you open an restaurant and serve canned spaghetti, you're probably not going to see high levels of success.

davidw2• 18 years ago

I think that it's kind of mistaken to attempt to put this whole thing in terms of 'neighborhoods and restaurants'. It's just not the same as on line businesses which purvey information goods.

rewind• 18 years ago

I think the Facebook example is a terrible example. If that had been their business model since day one, then fine, they can do whatever they want because every new user knows what they're getting. But if they get huge because users are flocking to their site without having to pay anything and dedicating a lot of time to the site, they shouldn't TAKE AWAY features that were previously free. That just seems wrong to me. That was the model they chose and that's part of the reason why they got so big. I don't think very many people created a Facebook account with the idea that they would eventually have to pay for what is currently free.

If FB had this business model from day one, I highly doubt they'd be as big as they are now. I think it's up to them to figure out a way to make money while not charging for any CURRENT features. If they want to charge for new features, that's fine; otherwise, it's just a bait-and-switch and they're doing a major diservice to the large user base that made them who they are.

charlesju• 18 years ago

The moment Facebook does this, I'm starting a Facebook knock-off and stealing every single one of their customers.

pmjordan2• 18 years ago

Then you'd eventually start burning up too much cash, would have to start charging, someone else would clone your facebook clone, and the cycle would start afresh. This is the social network predicament.

iseff• 18 years ago

Yeah, but if I did it, I would sell for a billion dollars. :)

gamble• 18 years ago

Facebook's business model: cross their fingers and hope very, very hard that someone decides to acquire them before the cash runs out.

Raphael• 18 years ago

Yahoo already tried.

nazgulnarsil• 18 years ago

zuckerberg already decided that running facebook is more fun than doing whatever you want everyday for the rest of your life.

hs• 18 years ago

even 37s products embrace free/no-money strategy to some extent

she can charge $ because the products have business use

next, the challenge for 37s is to make a pay-for-use 'wasting-time' sites ... with NO free trial

impossible?

A radical business plan for start-ups: Charge people.

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