Don't Make Your Product Free. Charge for it!

Whoa, that was a creative idea. I’m thinking to myself as I watch yet another person on YouTube come up with an entertaining and interesting idea. Everyday we view engaging content that takes time out of our day and helps us temporarily escape the harsh realities of this world (well at least harsh for some). While watching this engaging content we think to ourselves, “wow, I could do that!” This moment is critical to determining and justifying the following months and often years of our lives (at least for many entrepreneurs).

Justin.tv was one of these ideas for a number of people. They were the beginning of the recent wave of lifecasting services including Ustream.tv, Mogulus and a number of other video services. Overnight, the business plan that we believed was going to make us millionaires dissolves before our eyes as we see a new competitor enter the market with more funding, a better board and significant media coverage.

Everyday I have another person contact me with their “brilliant” idea that will make them fortunes. All they need is to launch their new free service that they will begin charging for 6-months down the road. Competition is harsh and without an extremely catchy idea or a serious team of advisors it will be practically impossible for most people to build something substantial.

Conversely, now is one of the few times in history where a few thousand dollars can get your product out the door and tested by the market. Today, Michael Learmonth posted about Mogulus and how their new revenue model is charging people. Brilliant! Charging people for a service is something that has apparently alluded many dreamers.

Rather than chasing after becoming the next Facebook or Google, it’s soooooooo much easier to start charging for your service. The funny thing is that charging for your service actually differentiates you from the rest of the pack on the social web. As I told one person today, you can charge for your service or go out and chase for investment money. The latter is a great idea if you are a good salesperson and well connected. For the rest, charge for your service!

Even if you are somehow able to talk an angel investor into writing you a check for $250k or even $1 million, not figuring out who your actual client is will kill your business. There are very few services that can run for free (or ad supported) and expecting yours to be that one is not a great idea. Then again many of my ideas are ad supported but hey, I’m one of the few that can make it, right? ;)

Maybe I should rephrase my statement. If you don’t have a revenue model for your business, don’t bet your life on it. Figure out a way to make money while building your free service, otherwise you may just end up broke. Entrepreneurship is not about risking it all, it’s about taking smart risks. What do you think? Should startups charge for their services?

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