LooseSuits

what makes you want to pay for a service vs. expecting it to be free?

Isn't it just the same as any purchasing justification?

• Does it save you time?
• Does it add value to the time?
• Are there free (or cheaper) competitors that do the same or similar things?
• Is it an industry standard? Eg: Do you need it to network?
• Uptime, performance, scalability, etc

37signals manage to make genuinely decent webapps -- best of breed in most cases -- making them highly desirable from the start.

Oli, I believe that there is one critical element you missed in your analysis.

Who is the target demographic of profitable, pay-for services online?

Businesses

• 37signal's flagship product, Basecamp is a project collaboration tool for team-to-team or business-to-client communication.
• Aaron Wall's SEO book is a evolving resource of up-to-date traffic enhancing strategies for the web.
• Michael McDerment's FreshBooks is an online billing tracking system helping you manage, distribute and receive payment on invoices.

Yes, all of these services have a focus on being easy to use, powerful, and professional but that's not what's most important. The biggest selling point of these services is that they help their users make more money and make money faster.

What makes the businesses willing to pay? ROI.

Excellent point there Teej about ROI. So then do you think that none of the people releasing new web services and applications feel they are providing their customers a good ROI so they give their stuff away for free or do they just think everything should be free during this era of the web?

I think they see by giving their start-up service away, they can attract enough attention to carry their upcoming services.

Or they're hoping they attract enough attention to be bought. Companies with too much money (read: Google, Yahoo!) still seem to be buying up small services regardless of the prospects of return on their investment.

I personally feel that the average joe consumer won't pay for a strictly online service for personal use. Consumer expectation in the web-only zone has been set to expect free services. "If I can check the news, check my sport scores, check my e-mail, share photos, and share videos online for free, it's only a matter of time until I find how to do X for free."

Services that can't directly sell to their users are applying the "Build it, and they will come - then monetize the crap out of them" model. That is, building a great service, but only getting revenue from a small percentage of your users.

If you aren't directly making people money, you have to offer free value to get people interested in you. Once you have a strong userbase, then you can make money, be it through advertising, paid accounts, informational product sales, or personalized services sales.

I think advertising is the most popular option because it's easy as hell to set up, manage, and optimize when you are spending your entire budget on design and development instead of marketing and sales.

But how often do you see any of them charge for upcoming services?

For me it's:

1. Is it useful? Is there something open source that works just as well or is it the best thing out there?
2. Benefit V Cost : Sort of as above but it could be time / money based.
3. If to use for client : Does it benefit their experience ie; basecamp helps my clients have control / know what is going on and as a result has benefited my business by repeat / happy clients.

The core of my business involves:
1. Basecamp / backpack
2. Blinksale

These all support and enhance the way I work so to me they are essential in that manner. There have been a lot of things I have tried but these run throughout as the best options.

I am conisdering offline biling though as Blinksale is not being updated as often as I need it - lot of things promoised and not being delivered. I think it's a key point that by offering a good service and promising upgrades can actually remove clients - close to happening with me on that one.

I don't pay for many things peronsonally: flickr is about it on that front.