Customers won't give you money unless you ask

Especially if the freemium startup becomes an acquihire.

You should spend 90% focusing on profits, and 10% coding.

I think there's facebook credits or something like that.

Its a great option, if you have millions and millions of dollars in the bank.

It is a very common result in cognitive decision-making studies that people don't value what they don't pay for. Whether or not you think the issue is more complex, the fact of it is very well established: in general, absent other measures of utility, price signals are used by purchasers in their initial valuation of a commodity. It's a limit example of the anchoring bias, a cognitive effect to which most humans are ridiculously susceptible.

There is a flow-on effect in the way consumers interact with a service provider, too: per account, you'll receive more complaints from free users than paying ones; vice-versa, more constructive suggestions from paying users than non-paying users. This result is explained as a choice-supportive response [look it up; "the tendency to retroactively ascribe more positive attributes to a choice invested into"], since the opposite behaviour would be a source of cognitive dissonance. It can be a source of frustration to paying users that their suggestions/requests are not then more highly valued by the service provider.

I was taken aback too when I read that (his implication that "free"="cheap"), but (in my opinion) there is some truth to it.

If I pay for a product, I will use it to the fullest bang of my buck (example: we go around our house making sure we fill up our trash can on trash day). If I get a product for free, the engagement level, my interest, my commitment...it's not on par (example: trying an app in the app store that's free and deleting it because there's a bug, not wanting for a new release).

Just curious, can you name any counter examples?

I think the notion of the "notoriously cash-strapped students" is a bit of a myth. Not that students typically have wads of cash, but most students I see around have iPhones, trendy clothes, spend money on booze and cigarettes. And even if you avoid generalizing students as trendy and cool, look at study aids students buy, they won't necessarily spare on a book or a laptop that would help them study.

At kenHub - we build a platform for learning anatomy. It makes students' lives easier and they can be more effective in their studies. As much as we'd like to give it away for free to all students, we need to make a living, and we need money to improve our products. Luckily, our audience seems to see the value and are willing to pay for it.

I think it boils down to the utility of your product, to students, grandmothers, or any other segment.

If your looking to make your product "exclusive," to a specific demographic....in the course of your business, someone is going to pay, whether it's you eat the cost, or your users do.

Even when Facebook started, it was hemorrhaging debt in the beginning...and eventually, they went to ads (even with the outcry). User's usually hate change, each product is different, so try to constantly ruminate a method or revenue (maybe even for select users in your demographic).

Well at the end of the day, somebody still has to pay you if your business is to continue running. So unless it's an ad-based business, you're gonna have to figure out how to monetise. It could be targeted at university departments instead, for instance, who you would convince to buy a license for their cash-strapped students. Point is, your marketing would have to be geared to that particular case. If you optimized to get non-paying students, you won't make money.