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Don’t bite the shit sandwich

unicornfree.com

105 pointsfadr46 comments

hah. I love it. Now, personally, I don't have a problem with 'free' but I do think that 'free' goes more with "I'm doing this because I think it's fun" than "I'm doing this so I can get rich." - I think most of the problems you see with 'free' happen when you try to get rich off your free product, rather than just trying to create a good product that happens do be free. Craigslist is an excellent example. I mean, craig did get rich, by my standards, anyhow, but he's careful not to overdo it. He could probably become rich by global standards by selling craigslist to someone who would spam it up facebook or myspace style, but he didn't. even now, he focuses on making the free product good.

That's the other side of 'free' - infrastructure is super cheap these days. If you build it because you think it is awesome, there's usually no need to get VC to rent servers.

Really, though, if you want to make money rather than just cover your costs, charging money for what you provide is the obvious choice.

My personal goal is to have a conventional 'charge money for goods and services' business that is successful enough to support me and my crew while we work on a few free 'because I think it would be awesome' boondogles, because that sort of thing is a lot of fun, you know?

Oh, totally. I only have a beef with "free" as business advice!

If you just wanna have fun, don't twist yourself into a pretzel trying to "monetize."

EDIT: Clarity!

And don't post on HN saying "Rate my startup" when you have just made a website for fun. A startup is - or should be - a real business.

BTW, http://everytimezone.com/ rocks! I've been using it quite a bit. Great work, hugely useful, free, and no pretzels.

Craigslist is an odd case, because I think he did actually get rich by global standards, or at least, he has more money than most VC-backed entrepreneurs with exits have. Estimates vary, but he appears to make somewhere between $10m and $50m in cash dividends from CL per year, possibly more, which would put his cash net worth comfortably over $100m, not even including Craigslist equity. There are plenty of startups that don't exit at a level that pays the founder $100m+, and Craig still owns the business even after raking in that cash.

And their model is pretty clear. They are exchanging goods (posting space for job listings) for money.

The critique of free isn't that you can't give away a piece of candy to smooth over business, but that free isn't a business model.

but they don't charge in a way that maximizes short-term profits. they charge in a way that maximizes long-term viability. They only charge for listings /if/ the poster makes money off the listing /and/ the section is so full that thinning it a bit might be beneficial to the readers.

I wouldn't say Craig is working hard to make the free product good. I absolutely hate the fact that I have to use craigslist for apartment search. It is terrible (but simple, yes) and Craig has made a conscious decision to keep it that way.

compare it to Dice or monster. or, hell, realtor.com I think it's really, really easy to make your product /worse/ by adding features.

That said, I personally have a few projects on the back burner that directly compete with craigslist in a very limited way. it /can/ be improved. I'm just saying, for most of the space, by resisting the urge to 'make it better' craigslist has ended up being the dominant player because craigslist is the best. being light on features has kept them from screwing it up too badly.

Hmm, on the whole monetization thing, there are a lot of good services that people (myself, anyways) would not pay money for. Twitter, Gmail, others. Figuring out how to monetize in a way other than "sell your product to your customer" is a real problem for such services.

Btw, I have never clicked on a google ad. Not once. I also now have adblock installed. Monetizing useful but free services is a tough problem, not to be dismissed.

also, the picture was gross

It's nutella!

Nutella is delicious! It's a chocolate hazel-nut spread. :)

Hehe, I figured it wasn't actually feces, but the picture plus title put me off a bit :)

I think what she's trying to get at is that you should try to focus more on ideas that have monetization baked in rather then the ones that just try to get popular and figure out how to make money afterwards.

In that sense, figuring out how to monetize good but free services is a non-issue because you won't be building a good but free service.

Yes, you got it!

There's also a good reason to believe that lots of people WOULD pay for something like Gmail.

Remember people trying to sell off invites back in the early days?

More importantly, having a direct line to the company controlling their email -- attached by money -- is a very appealing prospect for people who understand that free is dicey.

They will pay if it's effortless and trivially cheap and the competition isn't free either. The app store(s) have proved this.

Yes, people will push a meh product, not do any ground marketing, do a piss poor job of communicating, -- and, from the start, not solve a problem or reach out to their customers in the right way -- then they will fail to make sales, and they will blame the "well-known fact" that people don't pay for things.

In the mean time, I'm making a lot of money selling things where there are tons of free alternatives. People don't pay for content? I made $40,000 writing & selling an ebook about rich web app performance.

I'm hardly the only one.

Lots of people would rather blame the market, blame the customer, or blame the economy than consider that maybe they didn't do due diligence.

I'll be writing a lot more about that in the future.

The other trick here is that you are not Google. Nobody who is Google is going to read my post. They can afford to run at a loss -- because their goal, remember, is to have all of the information in the world. Therefore Gmail serves their ends, even if you never click an ad.

It's a bad idea to look at a behemoth like Google, who operates on completely different physics, and decide to model yourself after them without knowing the full story.

While I understand that they do tailor their ads to the information in your email, it was my (perhaps naive) understanding that the particulars of your emails were not used outside of determining those ads. Am I wrong in this?

I couldn't tell you, I don't know. But their public mission is to index all the world's information. That much we do know for sure, since they've said it themselves.

They are also clearly trying to cover ALL the bases, to have everybody sucking at their proverbial info-teat. They want you to store your calendar, docs, contacts, phone, videos, status updates, internet reading, spreadsheets, etc., etc., all on their servers.

Did you know they used Goog-411 to collect spoken phonemes to improve their auto-captioning of YouTube videos (so they can search them)?

This is clever… and largely unknown… and slightly scary, since it shows on the kind of game they're playing.

OK so this is totally off-topic. My point is, if you don't have the capital of Google, or their 30-level thinking, charge money! You can make a really good income. :)

Did you know they used Goog-411 to collect spoken phonemes to improve their auto-captioning of YouTube videos (so they can search them)?

Source?

LMGTFY:

http://www.google.com/search?q=goog-411%20phoneme

LMDDGTFY:

http://lmddgtfy.com/?q=goog-411+phoneme&v=

Hmm, it seems we can only nest three times. (edit) nevermind, I either missed the reply button when looking for it, or it wasn't there before, but I see I can nest further (end edit)

Anyways, I have a couple of ideas kicking around in my skull. Right now I'm trying to get some work so I can fund them with my salary though. One idea relies on ads for money, because no one in their right mind would pay for such a simple service. The other two are direct sales things.

Also, after reading the article, I became curious about which "fucking awesome" products the author (you?) is selling. I didn't see any links on the page to them.

Whoops, forgot to update my sidebar.

My main products now are:

http://letsfreckle.com/ http://jsrocks.com http://yearofhustle.com/

EDIT: I also do in-person (and soon, online) JavaScript training (http://jsmasterclass.com)... and I have quite a lot of free not-for-money sites you might recognize, including http://twistori.com and http://everytimezone.com

EDIT: I am a linkwhore.

> I am a linkwhore.

The fancy word for that is "meretrix" (or the Latin "meretrice" for maximum pomposity). A word like that suits your style, even if the definition doesn't :-)

>Hmm, it seems we can only nest three times. (edit) nevermind, I either missed the reply button when looking for it, or it wasn't there before, but I see I can nest further (end edit)

The reply button only shows up after some amount of time, which increases with nesting level.

Gmail could probably cost money and have a big userbase (at least now, when so many people know about it and use it).

But I think a lot of the community sites can't charge money. I don't see Twitter, Reddit, StackOverflow and other such community sites gaining nearly enough users that way.

I'm pretty sure that there's at least 100,000+ people who would gladly pay for premium Twitter services. The amount people pay for superior Twitter clients and other ecosystems is an example.

Granted the network effect is still in effect, but it could be a killer freemium.

Stack Overflow is explicitly a rebellion against Expertsexchange which has a free option with lots of upsell.

People do pay for gmail. It's called Google Apps.

I guess the thinking is that your so impressed with gmail for personal use that when you do start up a company you will use them for your business.

Of course you would pay for GMail - if the price was right. If an ad-free version of GMail cost 1¢/year (a lifetime for a dollar!), you would pay for it. In fact, you would probably pay a lot more that that if Google wasn't offering their service for free. And someone could easily still sell a webmail product, if it were better than GMail.

You can just mention death in all your emails to remove the ads. Google doesn't want to offend you by advertising coffins and funeral services for your deceased relative/friend. It's been a while since I've tried it, but it used to work.

There's a place for free, but I agree that those who start businesses and then have to come up with a plan to generate money are doing things completely backwards. It's one of the reasons I am annoyed at Twitter; they should be shunned for starting this thing with millions of dollars of other peoples' money and ultimately having no idea how they're ever going to make any of it back, but instead they get played up like crazy.

You've made this point in your comments, but offering a significant amount of content or software for free can be considered advertising for your paid product, and is practically essential for survival on the web anyway. Paywalls are last century; people want to be handed things now, and if you hand them things and give some slight nudges toward a premium account for extra features or whatever, that works fine, they just don't want to expect to be told anymore "$30 before you get to play". And honestly that's never been a good strategy, and it's even worse online, because it stops word-of-mouth, it stops search engines or other interested parties from indexing or trying your product, and just generally greatly reduces visibility.

Freemium is the way to go. There is no shame in charging for a good product, but keeping things under lock and key is not ideal either. You want to provide maximal "viral" potential, which is accomplished by making the bulk of the product freely available and accessible, and you also want to make sure you get paid in a good number of cases, which is accomplished by operating your free product correctly.

It's not like Twitter started it with millions of dollars of other people's money without those people's consent, though. VCs have been practically begging to throw money at them! So it seems like the people whose money it is are 100% on board with spending their own money...

Perhaps these investors view Twitter as a useful service, that happens to help their own business in some way. Rather than see it as a direct investment, they see Twitter as a public utility they are willing to pay for.

I agree with you about freemium, in general! As you said, I addressed it in the comments on the blog post, briefly.

But I think under the talk of freemium, the important questions get lost. Freemium - it's so easy, you give part of it away for free, and part you charge for. Right?

But what do you give for free? What do you charge for? How do you convince people to pay?

Those questions typically go completely unaddressed because of the assumption that money will, magically, appear somehow, with enough viral growth.

People treat the free part of freemium as if you can just slap it on like Sriracha sauce, and improve everything. That's simply not how it works.

Freckle has an extremely limited free plan and we sort of hide it. It is freemium but it is so limited it irritates some people.

But, based on the way other SaaS entrepreneurs choke on their coffee and go "Monthly?!" when I tell them how much we earn per 1000 accounts (total), that extremely limited, fairly hidden account works extremely well for us. :)

And, for the record, I believe the best free-mium strategy is to give away related content, not the thing itself. Give away the occasional cheese stick or cup of cocoa -- not the milk, and not timeshare access to the cow.

> But, based on the way other SaaS entrepreneurs choke on their coffee and go "Monthly?!" when I tell them how much we earn per 1000 accounts (total), that extremely limited, fairly hidden account works extremely well for us. :)

Could you elaborate on that? What's the use of your free account, if nobody uses it anyway?

I never said nobody uses it. We have several thousand free accounts. But we make it much easier & more appealing to sign up for a paid account.

It's like clipping coupons: you segment your audience by price sensitivity by making the cheap people (poorer leads) work for their discounts.

OK, thanks!

I buy all the Unicornfree ideology here. But I can't help but begin to think that I reject shit sandwiches simply because the shit sandwich makers reject me. By the way, I also eat up all the preaching that comes out of 37Signals. I love that stuff. I love being an underdog. But, is it an inferiority complex?

I have my own thoughts on this: http://fireworksfactory.blogspot.com/2010/05/hacking-on-dyna...

That's a really good point. I read most of your essay, and you're probably going to hate me for this, but… all that effort you put into engineering a new type of business, why didn't you use that energy for building a product you can charge for?

I don't agree with "always work on your best idea." My philosophy is "always work on the your best idea that is the nexus of being fun and earning you money soonest."

That's why my first SaaS is a time tracker, and not the giant perfect project management suite that lives on in my daydreams.

And the best reason to avoid VC is not so you can feel like an underdog, but because A) it's often a pyrrhic victory, and B) you add one more cook to the kitchen. I hate anyone telling me what to do. A VC is a client, in another form.

Building a product right out of the gate, having fun doing it, and reaping the rewards for it, both monetary and plain 'ol satisfation, is something we really missed. I do regret that.

We're going to do it though. In our case we had the idea for the business before the idea for the product. I would not suggest doing it that way again, but that's just the way we were thinking at the time.

> A VC is a client, in another form.

Only, clients give you money that you can use in any way you see fit: Grow your business, buy a West Coast Freeride bike, save it for a rainy day.

VCs put money in your business and then take your business for themselves and decide how to spend their money. It was never yours and never will be. If you wind up getting a big, big payday, you might get some of that money. But you'll never get a penny from the VC.

Thus, I would say that while there are excellent reasons to do business with a VC, if we are comparing them to clients I would say they are more demanding than clients while paradoxically giving you no money at all.

I was thinking of it purely in terms of decision-making -- if you are only bootstrapping, you are free to serve your customers to the best of your ability, and shape your business how you choose. I have seen many friends forced to compromise because their VC demanded it. (And not the everybody-learns-and-grows type of compromise.)

But you really pounded the financial nail into the coffin there :)

I like free web sites. If companies somehow can pull that off, more power to them.

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