C2C Balloon

Should I charge for my web application?

Posted by Horacio Poblete @ March 19, 2009 in c2cballoon

3 comments

For some time now, I have been hearing about how web applications need to be free, or very close to free at the least.

The interesting fact here is that these “free future” gurus are often owners or founders of social networking sites. And as we discussed on our last post, no one has a clue as to how to go about making cash from a social community; the ad-based revenue model works only for huge and very particular social sites. So why then should we consider that this “free” model is worth it for everyone?

If you have a consumer-facing application, perhaps you don’t really have much of a choice and you have to bet on creative strategies to make money for your business indirectly. But if you have a fancy and useful business-oriented web application, why on earth wouldn’t you charge for it? Why do some pseudo-gurus insist on turning the word “charge” into a dirty one?

Let’s say this very clearly. Startups need to become cash flow positive, and as one friend always tells me, “in an economic crisis cash is king.” There’s nothing to be ashamed if you focus on profitability, especially if you are building your web business in a socially responsible way. Humanizing Technology remember? Let’s be consistent here. We simply cannot expect entrepreneurs to invest in bringing brilliant ideas to life and building sustainable web businesses based on the weak ad-based revenue model.

Even if you have big subsidies and raise huge capital, you should put a price on your idea if you have a niched product. You’ll be amazed - and maybe you shouldn’t – at the number of people who are willing to pay for a good web application.

Do you believe you have a great product? Does it help your clients save money, make them more efficient, or just be more organized? Then don’t hesitate and put a price tag on that web application.

Do you want to make money with a new social networking application?

Posted by Horacio Poblete @ March 12, 2009 in c2cballoon

2 comments

Well, welcome to the club! There isn’t a clear and killer way to monetize social networks yet. Consumer-facing applications are struggling to pay the bills using the traditional advertising model, and even if you read in the news that “Facebook is worth $15 billion,” you may face significant challenges if you want to make money by building your own social networking application.

The interesting thing is that even if nobody has a clue about how to make millions with a social community, they still can sell it. Blame the “bubble” for this irrational behavior.

People may tell you that these sites have zillions of members, high traffic, marketing potential, blah, blah, blah, but ask yourself if you would pay just $10/month to use MySpace or Orkut? Your answer is probably a resounding “No!”

Here, we are talking about big, huge social sites. It just doesn’t seem reasonable to me to believe that small or new social networking applications can really be profitable with an ad-based revenue model. You have more chances of winning the lottery than to have the same luck and success as Facebook.

I’m not saying that social networking is not for businesses, but the big problem is that it’s not clear what it is you can do with a consumer-facing social network when it comes to making cash. There’re some great business-oriented examples like LinkedIn, but they don’t count only on advertising to be profitable.

If you want to do something cool, and you don’t care about its profitability, then go for it! And write to us as we really love to talk with passionate and idealistic people like you. But don’t do it for the money. Coolness shouldn’t be confused with business utility or profitability.

It’s about time we had a reality check. Startups must recognize the need for profitability. I think some investors are going to lose of lot of money if they’re rooted in irrational behavior. And this time, they can’t really blame any economic crisis.

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