Free vs. Paid Web 2.0 Sites June 25, 2007
Posted by Bryan Povlinski in Web 2.0.trackback
The internet is booming these days with the creation of thousands of new sites in the so-called “Web 2.0″ category. Ranging from social networking to productive gadjets, or “widgets,” to interactive forums, this Web 2.o movement is actually quite useful. The one thing I find interesting though are the business models these sites are carrying out. Most of the new Web 2.0 sites are free to anyone, but there are several quite popular sites that require paid memberships as a full option. One prime example that I am familiar with is LinkedIn . I know there are dozens of others that require a paid membership, but these two sites in particular are what I would like to focus on.
First of all, there are two prime revenue generating concepts for a Web 2.0 site: paid subscription and advertising. Google cleary revolutionized the internet advertising business and many companies have followed suit. Advertising has become such a huge source of revenue that it is very easy for a popular site to earn a massive profit off of advertising alone. Networks like MySpace and Facebook are worth millions, even billions of dollars, and their members pay no subscription fee. However, LinkedIn, the self-proclaimed “King of business networking,” charges a substantial fee for any of their premium services. LinkedIn is a wonderful tool with many outstanding features and many people have been able to truly leverage it for business success, but with all the pressure from other start-ups offering similar or superior features for free, it could easily become obsolete. There has been a lot of discussion recently about whether Facebook could completely dominate LinkedIn’s market segment by allowing different parts of your profile to be viewed by different contacts. This would ultimately allow users to have a professional profile and a personal one so that they can moderate who sees what.
If this is the case, or if another start-up offers a service with superior features to LinkedIn for free, why would I still use LinkedIn? I might maintain my account there, but encourage my contacts to join this better service so that more could be done. It isn’t common for people to have profiles on different sites such as MySpace and Facebook, and it also isn’t common for a brand new company to essentially take over even if it starts far behind (watch Facebook begin to dominate MySpace in a few years to see what I mean).
Essentially, I believe many users will get frustrated with LinkedIn, especially if they move to a greater reliance on paid subscriptions. When I am only given a limited amount of introductions and network questions, it discourages my use of these tools altogether. I don’t understand why they can’t see the reward of moving to a free system with all the features and then luring every potential customer now that the LinkedIn name is well-established. The ad revenue would be enormous, and would probably easily outpace the revenue from the subscriptions.
Another service that fits this description is the Motley Fool Community. I love the Motley Fool website, and I also think their innovative ranking system within Motley Fool Caps is outstanding. However, why do I have to pay $30 a year to use their discussion boards to ask the questions I want to discuss? If this service was free, it could easily become the prime place on the web for financial discussion, and the ad revenue would be huge.
I hope the Web 2.0 sites currently using a business model of paid subscriptions will quickly see that this is an inferior strategy. It is too easy for another network to come along and wipe you out because the new network is free. Dropping these paid subscriptions will lead to more revenue, bigger social networks, and happier users. Gotta love a win-win.
Good post. You are correct in predicting another start-up coming along and offering more superior features.
Check out Fast Pitch! http://www.fastpitchnetworking.com
In less than 9 months they are already ranked as a top 3,000 US website based on traffic. More importantly, they offer a highly interactive platform designed to help people promote their business (as opposed to a glorified resume). With Fast Pitch! you can make connections, post press, promote your blog, attend events, receive automatic search engine optimization for all of your content, and more… I would compare it to the Facebook layout (highly organized, cutting edge features), but obviously designed for business.
Chad D.
Great post. The paid strategy is both inferior, and horribly irritating.
It’s not always clear to me how it is all these new “Web 2.0″ sites are making their money. (Are people really clicking that many ads?) What is clear is that most of them are fun, but non-essential. I used to love Motley Fool back when they had free portfolios. Because I was there anyway, I read tons of their articles, but when they spun that off to yahoo and focused more on selling me subscriptions, they lost me. Haven’t been there in a year.
LinkedIn worries me too. I like it, but not enough to pay for it. It just doesn’t do that much for me. Another site that is increasingly irritating is Class Mates (or *ss Mates, as I think of them). Constantly pounding you with bait-and-switch spam email about paying to finding out who visited your profile, and who posted what picture of their kids. Daily! Who cares! I regret ever signing up for it. If it was free, I might actually spend time on it. Who knows, I might even click an ad or two.
My question is to Bryan Povlinski. Would like to know why you think the paid services by a website are not good option. Let me take an example of free dating site and paid dating site. Refer to the article below and give your views on the same
I came to realize that free dating sites were awfully expensive.
Want to know why?
First, free dating sites attract all types of rubbish: Nigerian scammers, Russian “mail order brides”, and all types of unstable and wicked people that were banned from quality services. Those people have too much time on their hands (or it is their full-time Internet rip-off occupation) and this is why they don’t mind to hang there.
On the other hand, since the website is free, they do not have much staff on hand to look after it, and check on possible scams. So scammers are free to go wild there.
Second, free dating sites usually make their revenue from the ads they show to their members. In other words, they aren’t really interested in you actually FINDING someone on their site: they would rather have you frustrated and clicking on the ads you see on their site.
Another venue is selling your email address to mass-mailing companies, or running mass-mailings themselves. It means you risk being bombarded with hundreds of commercial emails, day after day.
Third, I find it appalling that a person cannot find some twenty bucks to pay for a subscription. As a woman, I want to KNOW that the guy I am talking to is at least capable of paying his own rent.
If I were a guy, I would also prefer a woman who is capable of looking after herself and doesn’t think a man is there to provide for her.
Forth, the software on free sites is often inconvenient and the customer support sucks. I prefer things that work as they are supposed to.
Fifth, for a busy person like you and me, filtering through heaps of bogus profiles can be maddening. My time is valuable. I’d rather spend it meeting someone for coffee than talking to people that aren’t even real.
On a paid dating site people have invested something in the process, so they are more serious and don’t play games.
Sixth, for all the reasons outlined above, quality people tend to avoid free dating services. Their time is too valuable. If you want to meet a quality person, you are unlikely to meet them on free sites.
All in all, I have realized that using a free dating site is awfully expensive. I simply cannot afford it. It costs me more in time and effort, which I could use more productively – like running a dating coaching session, or writing an article.
I’d rather pay for subscription and have ten times less frustrations and ten times more results.
What about you?
lucky
Lucky,
Thanks for your post, and you made a lot of very good points. I have not used an online dating service before so I am not very familiar with the environment. I understand in that context where it would certaintly be beneficial to pay for a subscription in order to weed out the spam profiles. I definitely agree with the fact that not having a paid account can lead to a lot of frustration. I also understand what you’re saying about mass-mailing lists, but I’ve never encountered problems with that in any of the services I’ve joined. My point was really on the business side of the sites themselves. The sites can stand to make a lot more money if they gain a lot of customers through free accounts with additional ad revenue than if they gain a small amount of fee based accounts. Also, if another site with similar features offers a free service then a subsciption based service is going to lose some members, or at least not grow much more due to the competition. If free, legitimate services became the norm then there wouldn’t be many of these problems that you discussed.
FYI– The Motley Fool discussion boards are now free by invitation or application.