Welcome!

Web 2.0 Authors: Pat Romanski, Elizabeth White, Liz McMillan, Peter Dyer, Tim Hinds

Related Topics: Search

Search: Blog Feed Post

Damn You Google, Damn You Yahoo! Why D'Ya Do This to Us?

How FREE can kill innovation & your startup

A strange dynamic has taken hold on the internet.  Just as people expect sunshine and air to be free, they also expect internet based software applications to be free.  Ok, maybe not completely free… they agree someone should pay, just not them.  Damn you Google, damn you Yahoo! why did you do this to us?

With companies left and right offering full versions of their products for free,  users have been conditioned NOT to pay for anything.  This conditioning can be seen across everything from social media sites to messaging to business applications.  The problem with this as I see it is the negative impact on innovation.

Users think that they win by getting free software or services, but do they really?  If you ask me the only real winners in the free ecosystem are the investors behind well funded companies.  By locking down markets with free offerings companies can effectively prevent new entrants from emerging.  This stifles creativity and innovation.

In a meeting a few months back with a partner from Benchmark Capital, I found out that on average they see 3-5% conversion rates on FREE offerings within their investment portfolio.  For most of us this is rather daunting news.

Let’s do some quick mathematics.  Let’s say that you are getting started and you have 2 servers from Amazon Web Services (1 web server/app server and 1 db server). Your monthly cost is going to be around $200.  Let’s now assume that your multi-tenant application can handle 100 accounts on that server, simple math $2 per account cost.  Now you go out and offer your service FREE and you have some success.  Let’s say you sign up 1,000 free accounts.   You scale your costs linearly so you are now spending $2,000 a month to support those free accounts.

You get 5% to upgrade (eventually) to your paid account of say $20/month – at this rate, even with success it costs you $1,000/month just to keep the lights on. Now add to that your Google Adwords budget, your credit card processing fees and the dozen other bills you have each month and you find yourself quickly in the hole by several thousand dollars a month.

Now what happens if you get slash dotted or an article about you ends up on ReadWriteWeb?  Your monthly costs can zoom beyond your meager savings account, all without any real revenue in return or an endpoint in sight.  The end result of your short term success will be the failure of your start up because you ran out of money.

There is also another aspect of the “FREE” account that costs you time and money.  To support a layer of free accounts you have to write code to restrict or to compartmentalize your solution.  This takes your valuable development resources and shifts them from building killer technology to building layers of management so you can support the free users.

I just heard you shout…”But David, you must have a free version or no one will use your software!” I disagree my new friend.  If you look at the Salesforce.com pricing page they don’t have a free model. Neither does Netsuite. These companies are in business to make money, not give away software.  I like this model and hope to see more and more start ups follow it.   At my start up project MioWorks.com, we are holding to this model and offering a free trial to introduce users to our software.  I feel this is an acceptable compromise because it has a definite end period and you don’t have to over-provision your computing environment to support thousands of free accounts in perpetuity.

As for you users out there, don’t be shy to actually pay for something you like to use.  You don’t think twice about dropping hundreds on a camera but you won’t spend $20 a year to store and manage your photographs in an online application.

In the past year or so, Apple has shown us that users will actually pay if the paradigm is broken.   The Apple AppStore is a great example of how to break the cycle and get users to  pay for technologies.  As entrepreneurs we need to watch how this model is evolving and how we can capitalize on it to help fund our ideas and companies.

My last word of advice helps both the user and the start up.  Users, if there are vendors with products you just love but they are too expensive, then tell them.   Tell them the price point that would be of interest to you.  Tell them how to get your business.

The end result of spending money on products you like will be a wider variety of products with more and more innovation.  And who doesn’t like variety! Maybe Google.

More Stories By David Abramowski

David Abramowski is a co-founder of guidearama.com. David's background as a technologist and a product marketing manager enables him to look at today's solutions from the perspective of the user. David's career spans early stage startups including Axent Technologies, Vignette and Morph Labs as well as enterprise mainstays such as Symantec. You can also follow David on twitter @dabramowski

@ThingsExpo Stories
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series data. By focusing on enterprise applications and the data center, he will use OpenTSDB as an example t...
The industrial software market has treated data with the mentality of “collect everything now, worry about how to use it later.” We now find ourselves buried in data, with the pervasive connectivity of the (Industrial) Internet of Things only piling on more numbers. There’s too much data and not enough information. In his session at @ThingsExpo, Bob Gates, Global Marketing Director, GE’s Intelligent Platforms business, to discuss how realizing the power of IoT, software developers are now focused on understanding how industrial data can create intelligence for industrial operations. Imagine ...
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water, are pursuing SmartGrid initiatives that represent one of the more mature examples of SAE. We have s...
There is no doubt that Big Data is here and getting bigger every day. Building a Big Data infrastructure today is no easy task. There are an enormous number of choices for database engines and technologies. To make things even more challenging, requirements are getting more sophisticated, and the standard paradigm of supporting historical analytics queries is often just one facet of what is needed. As Big Data growth continues, organizations are demanding real-time access to data, allowing immediate and actionable interpretation of events as they happen. Another aspect concerns how to deliver ...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using the URL as a basic building block, we open this up and get the same resilience that the web enjoys.
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, data security and privacy.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.
"People are a lot more knowledgeable about APIs now. There are two types of people who work with APIs - IT people who want to use APIs for something internal and the product managers who want to do something outside APIs for people to connect to them," explained Roberto Medrano, Executive Vice President at SOA Software, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Media announced that Splunk, a provider of the leading software platform for real-time Operational Intelligence, has launched an ad campaign on Big Data Journal. Splunk software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. The ads focus on delivering ROI - how improved uptime delivered $6M in annual ROI, improving customer operations by mining large volumes of unstructured data, and how data tracking delivers uptime when it matters most.
DevOps Summit 2015 New York, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce software that is obsolete at launch. DevOps may be disruptive, but it is essential.
Wearable devices have come of age. The primary applications of wearables so far have been "the Quantified Self" or the tracking of one's fitness and health status. We propose the evolution of wearables into social and emotional communication devices. Our BE(tm) sensor uses light to visualize the skin conductance response. Our sensors are very inexpensive and can be massively distributed to audiences or groups of any size, in order to gauge reactions to performances, video, or any kind of presentation. In her session at @ThingsExpo, Jocelyn Scheirer, CEO & Founder of Bionolux, will discuss ho...
We’re no longer looking to the future for the IoT wave. It’s no longer a distant dream but a reality that has arrived. It’s now time to make sure the industry is in alignment to meet the IoT growing pains – cooperate and collaborate as well as innovate. In his session at @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, will examine the key ingredients to IoT success and identify solutions to challenges the industry is facing. The deep industry expertise behind this presentation will provide attendees with a leading edge view of rapidly emerging IoT oppor...
“With easy-to-use SDKs for Atmel’s platforms, IoT developers can now reap the benefits of realtime communication, and bypass the security pitfalls and configuration complexities that put IoT deployments at risk,” said Todd Greene, founder & CEO of PubNub. PubNub will team with Atmel at CES 2015 to launch full SDK support for Atmel’s MCU, MPU, and Wireless SoC platforms. Atmel developers now have access to PubNub’s secure Publish/Subscribe messaging with guaranteed ¼ second latencies across PubNub’s 14 global points-of-presence. PubNub delivers secure communication through firewalls, proxy ser...
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective storage designed to handle the massive surge in back-end data in a world where timely analytics is e...
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrategies, will examine why IT must finally fulfill its role in support of its SBUs or face a new round of...
The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.