Most agree that the more users you have, the better. Interestingly enough, this is not always the case. Another misconception arises around pricing. Most would like to offer their services free of charge at all cost (no pun intended). Once again, this is not always the best option. Often times, a smaller, closed, paid community may offer more advantages than a larger open community.
Nowadays, it’s almost unheard of to charge for a service. Google AdSense is a staple. Advertising is considered the main revenue stream for most start-ups. This eliminates the commitment and barriers to entry for new users. By alienating potential users with a fee, the company may be bypassing a high percentage of their target market.
However, there is a quasi-hybrid version. Free trial periods eliminate the financial burden and provide a glimpse into the service. Forcing the ‘blind jump’ upon new visitors is not only dangerous, but unacceptable in this day and age.
Many services offer a free, ad-supported version or a premium, ad-free subscription with additional features. For the most part, users are satisfied with with the former option. But power users and those annoyed by ads may pay the usually small premium. But what do paid, closed networks offer that is often overlooked?
By limiting a network to paying customers, the service is able to elude (for the most part) spammers and illegitimate users, as well as uneducated and inactive users. If a credit card is being billed monthly, you’ll quickly find out who your power users are.
Implementing a paid system should in theory lead to a higher quality network, which in turn should lead to a more respected, credible name. This branding strategy further solidifies the outward facing image in terms of quality.
I’m not saying that all networks should be closed, or multi-level, or even free for that matter. Each individual site or community must determine which path is most appropriate. If a paid option is considered, there must be a significant value proposition for the user. The service must provide differentiation and a strong bond with the user, otherwise they are prone to switch to a competitor or simply drop the service altogether. If a user can’t live without your service or depends upon it very highly, you’re on the right track. It’s quite possible that the user is willing to pay.
New companies must decide which revenue model to adopt. Obviously, a case-by-case analysis must be performed. But the important thing for new companies to understand is that it is okay to charge if you feel the service merits the fee. Not all companies can and should be monetized by Google.