Can a free Web 2.0 survive on ads?
Scrivs has a interesting post on “Why there is no Ad-Supported Fast Food“
“If McDonalds were to go the Web 2.0 route everything on the menu would either be free or under a dollar with a huge ad slapped on the packaging. Or maybe they fill your bag with more junk than your mailbox just to push some burgers into your lap. Hell, it makes sense to me and they have to do this because of strong competition from Burger King and Wendy’s.
In reality they don’t do this though because they have costs that must be handled. They have to pay for the food and I am sure their employees would like to take home a paycheck and because of this they charge for their food. In the Web 2.0 world the same costs apply. We have to pay for hardware and since your time is money just like it is everywhere else we have to pay for the people who work with us. However, we still feel that the only way to things is to give them away for free and just slap some ads on them because of strong competition.
The point is when it comes to your competition if the only thing separating you from them is price then you will always be in trouble.”
And a crux of the point comment from Rick Turoczy:
“Where is the value? And more importantly, where is the value to the market? Where is the value worth paying for?
If you build something that the market would either a) have a hard time justifying with a cash investment or b) completely refuse to pay for, then are you really delivering value beyond the value you derive out of it?
And if you believe that you are delivering value, but the market still doesn’t get it? Then, it’s a communications issue. You’re not communicating the value to the market. This is why designers often get stuck in low-cost or free services: it’s really difficult to communicate the value of good design to the ill informed.
Like you say, if you continue to give everything away, you’re communicating that the concept–as a whole–is worth nothing. That it has no defensible value.
The hybrid solution is the key. The “loss leader” or “dollar menu.” Give part of it away, lose money on it, but make up for that loss with the truly valuable service.
Finding that fine line where free ends and value begins? It’s a tough one”
Main points to be noted:
- If the only distinguishing factor between you and your competition is price, then business is not going to last long.
- Make money where you create value, if at all you plan to give something for free let it be the stuff that aids people to obtain that value from you. Even better if there is serendipity in obtaining something for free.
- Your pricing on value should be according to the worth of entire product / service / solution that you offer no less no more.
- If there is already a existing product / service in the market that offers it free, then think is your value offering significantly better or different, for you to price it? Would people want to pay if they can make do with something that is free though not valuable.
