Free apps are not the future
I'm a little late picking this up. Probably because I was in Amsterdam at the time. 37Signals' Jason Fired opened up the Future of Web Apps conference by talking about how the future of web applications will be about paying to use them.
Here's the source for this story on CNET: http://news.cnet.com/8301-13515_3-10170665-26.html
I couldn't agree more. Believing that there is enough advertising out there to support all these web applications is naive at best. I'm inclined to think that leaving advertising out of applications would leave more in the pot for websites that desperately need the ad money and will most likely always continue to be free.
The model 37Signals has built is one I've always been a big fan of – and wish my old company had thought of many years ago as we might have done much better with some of the apps we were working on at the time. The idea of offering a functional, but very limited free version is so good for sucking people in. In fact it's worked on me with both BaseCamp and Backpack. I've since replace BaseCamp with Project Tracker and Backpack with Google Docs, but I did use both for many months and were I still freelancing would likely use BaseCamp.
A number of successful companies have adopted this approach. Most recently I tried out free versions of SpringLoops and BeanStalk, both are SVN hosting services. After setting up a project on each I decided to stick with SpringLoops. I use a free account for some personal stuff, but recently signed up to a mid-tier subscription service for use at work.
I'm not sure content based sites will ever be able to make money on anything but advertising, nor do they even want to charge the end user really. Ad money makes sense. But for a well developed service or application I think asking for money is completely fair. Perhaps we've only touched on this even. There are probably other workable models too, pay-for-use, pay-for-output, pay-for-cpu time? For high quality applications I think any of those approaches could work.
The "everything on the Internet is free" meme has to die eventually. It simply isn't sustainable. Open source developers all know this. This is why all the major open source projects also offer paid support or additional services based around the project. Downloading music and movies and TV for free can't last. This things all cost substantial amounts of money to produce and the people making them deserve to be paid. This is where I think the Internet wins. The creators can reap the majority of the wealth from their efforts, no longer requiring complex and costly distribution networks. And just like these more traditional media, cloud based applications will also need to tap into the user's wallet to sustain themselves. The difference now is that by eliminating the distribution channels, the creator can make more money but charge less for the product at the same time due to easy access to a global audience.
The final piece is where things get cyclical and sustainable for the web as a whole. Paid apps and services need to market themselves. Spend those marketing dollars on ad based websites. It's that easy. Now free content and paid services are supporting each other through completely different means but don't require much outside help.
All this ties back to the game industry of course. These guys have been there and done that, even if they don't always realize it themselves. Text based MUDS like Achaea by Iron Realms have been doing micro-transactions for in-game items and benefits for eons and are still operating as very successful businesses. We aren't talking about the kind of money that WoW pulls in but it is definitely sustainable and profitable. EA is moving to an online model with Battlefield Heroes. Other smaller MMORPG's have also been very successful with varying payment models. The point is, you don't have to be huge to be a success. Small, efficient teams that make a good product can definitely pay the bills and even make some money to invest in other projects. It is possible to find enough people to keep a well thought out service going.
As always, this got a little more in-depth than I'd planned but I think this is a discussion that's worth having.
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