Reality VS Freemium

Posted by PartyWeDo on Tuesday, April 20, 2010

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Nothing sustains a business like real money…
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Venture Capitalists can seed and prop-up an enterprise for a while, but someday something needs to be sold in order to sustain a business. The need for selling things has been demonstrated this past week with the announced business model changes for Ning

Audrey Watters of ReadWriteWeb suggested that; “Despite over $120 million in VC funding, Ning has been unable to develop a sustainable business”.

Ning used an all too familiar internet model called Freemium and then caused and uproar when they abruptly cut out the free part of the equation.

Freemium has worked successfully for some start-ups, but those companies that have real influence on the web have found real and sustainable ways to make money. They do this by offering something of value for sale.

Unfortunately, those who can’t find full support using the Freemium model have chosen to chase the advertising budgets of others to pay their bills, rather than finding something real to sell.

Advertising revenue is a legitimate business model, and has been very successful for a few web properties. But there are an finite number of ad dollars and an exploding number of options for advertising placement.

All of the talk about getting eyeballs on the page has created a modern gold rush for site traffic. But site traffic is like fools gold if there is not a sustainable selling of valuable goods or services attached to the business. David Heinemeier Hansson analyzed this issue in his discussion on 37signals; “Ning’s problem is not a lack of eyeballs but its inability to turn them into cash money to pay the bills”.

We continue to suggest that selling something of value has been and always will be the best way to start-up and run a business. Freemium and advertising does work for some, but selling something for at a profit works for almost every model. Finding something of value to sell to millions of consumers has proven to sustain some great enterprises.

Heck, the guys who sold shovels and mining equipment made a fortune during the California and Yukon gold rushes!

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PartyWeDo
The AlbinoPhant Creators
Your Party 2.0 Specialists


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