I have been thinking about the psychologically of making money out of free online services largely as a result of having developed services that have attained healthy traffic, yet failed, like many others, to make any profits.
“The most awesome stage”
Last year, Facebook's VP of Design thought the TNW Conference main stage was the best she'd ever been on.
Using free as a business model is easily one of the fastest ways to gain traction, However, if the solution provided is too efficient, no new pain will be created and thus there will be no opportunity to make any profits.
Rarely there are unintended consequences which arise out of new solutions. These ultimately manifest as a new pain for the users and oddly, it is precisely these events which need to be carefully considered during the planning stages of the new concept if it is going to be successful!
When providing considerable value to users and thus gaining traction with a free service, I argue the intended consequence should be to create a new pain. Then one simply charges for the resolution of this new pain.
Interesting Case Studies:
Company : MegaVideo
Value : provides great value with reliable video streaming, a large library of content and good image quality.
Pain: limit of 1 hour free viewing, demanding payment (20 euros = 3 months access) to watch the last part of a film!
Company: Plenty of Fish
Value: provides free online dating networking service.
Pain: creates pain for competitors who then pay to advertise.
Value: provides free blogging software.
Pain: spam, users invest considerable energy into the platform, then suffer huge comment spam issues, resolved with the askima plugin (cost 49 euros).
Each of the above are interesting examples of companies who have intentionally or unintentionally created services which have gained considerable traction out of free, which has then resulted in a new pain being experienced by either their competition or their users, many of whom have payed for that pain to be resolved.
Is it ethical and does this matter?
Maybe and maybe not (depending on the variables), but what matters more IMO is the resolution of problems and the advancement of technology. I’m sure some will cry foul and accuse thee of simply looking for ways to exploit others pain which is true, but before you can exploit the new pain you have to solve another problem and/or provide considerable value to the target which is the the primary hook, so the end justifies the means and as long as there is added value then most people should be happy…