Nick Gonzalez from TechCrunch posted about a “great iPhone chat application” by a company called Mundu.
Then he slings this at his 500,000+ readers (many of which are calling bullshit in the comments):
“So why in the world will they eventually charge $11 for it? There are way better ways to monetize software. Offer a free version and drop an advertisement into the conversation every once in a while, for example. But if Mundu wants to get a lot of users fast before Apple adds their own apps, they can’t be screwing around with charging customers. The marginal production cost of software is zero. That’s what the price should be.”
This is typical of the sensational tech/media/business press: an obsession with all things free, all things inflated, and all things unsustainable. Sustainability doesn’t mean going back to your investors for another round because you don’t have enough to pay your employees because you don’t have any income because you don’t charge for your products.
They forget that not everyone has Google’s search subsidies, Yahoo’s traffic, or Apple’s hardware revenues making up for their “free” bundled software. The rest of the companies in the world have to put a price tag on their wares and sell them on the public markets. And surprise!... The public is happy to pay for great products. Advertising-subsidized product revenue is just a teeny tiny sliver of the overall economy. Most of the rest is buying and selling of goods.
“The can’t be screwing around with charging customers” and “Why in the world will they eventually charge $11 for it?” and “Offer a free version and drop an advertisement into the conversation every once in a while” are toxic suggestions. That is unless you want to go broke. And to suggest that software should be free because the marginal production cost is zero is about the most bizarre proclamation I’ve heard in a while.
With a few obvious bigco exceptions, I’d like to see a count of successful and sustainable software companies that are surviving and thriving giving everything away for free. I can point to hundreds of examples of small software companies running in the black by selling their products to their customers. The shareware industry, for example, puts much food on many tables for many families because the software builders price their products and put them on the market. People try it and people buy it. People are happy to pay for things they find valuable.
So don’t think for a second that you’re “screwing around” if you charge customers. What you’re doing is saying “This is our product, we believe it’s valuable, and we think you will too.”
There are few things more satisfying than having people find enough value in your ideas and products to trade their earned money for what you’ve produced. It’s primal and wonderful and every vendor should experience it. It’s great business and it makes your business great.