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I've been thinking about your comment for 20 minutes now, and still don't understand what you mean — what do google/apple, and 37signals/twitter, have in common (business model wise)?

And with the "mom & pop" stuff, I was just referring to it being a pretty low risk model — you make something, end-users pay you, you use that income to pay your costs (compared to building something, hopefully having tons of users, and then wondering how the hell you're going to support it, never mind profit from it.)

I'm not saying "mom&pop"/paid model is bad, quite the opposite, it's my favorite…but I can see why a lot of sites decide not to use it




I don't understand your argument, because you aren't being coherent. What's low-risk? Selling time tracking software and clearing $20k a year? Or selling bookkeeping software and being Intuit? Where's the zillions of users? Being Aviary and doing free online vector editing? Or selling Photoshop and being Adobe?

The echo chamber thing is crazy here. We have a hard time finding success stories in pay services. That's because all we're considering is the ASP model. The ASP model is relatively new and heavily influenced by the San Francisco Startup model, where VC funded companies trade revenue for uptake because they will either get acquired or BK.


    What's low-risk?
Just the whole point of selling something to the end-user. There isn't much which can go wrong — you create something, people pay you for it, and you can grow (resource wise) as fast as your user base does. That's what I'd call "mom&pop", you start with something small, and you expand as your income grows.

That's compared to building something, hopefully growing like mad, getting VC funding, getting mentioned a billion times on techcrunch, struggling to just cut even…and then hopefully getting acquired.

I know which I'd choose; for a real business, the paid model is leaps ahead! But what does that mean for the Diggs, Twitters, other massive sites, and big ideas still in peoples heads which can't be monetized by the end-user?


It's a pretty simple argument...

  A. Charge users from day 1. Your profit is easy to figure out, you should be profitable early.
  B. Build a userbase, *then* figure out how to extract money from it.
A is a low risk lower potential reward, B is a high risk higher potential reward.


I don't see the higher potential reward logic for Plan B.

Like.. you build a userbase and then one day you flip a switch and your 10,000 uniques open their wallets in unison?

When did it become fashionable in the business world to insist upon punching users in the face with a product or service?


To get 'A' right, you have to line up product and price. That's not low-risk. Your argument that B is higher risk/reward than A is nonsensical; it depends entirely on the particulars you choose.


Not really.

If A is failing, you can tell as you're going, and adjust. It obviously still requires skill, but it's just the time tested "make something, charge for it" model. As soon as you get users, by definition, you get revenue, and if you're competent, that means profit.

With B, you are deferring all or some of your income to some later stage. If it's not going to work out, you might not know that until the last minute when you're supporting a large userbase. You might never find a business model. OR you might hit gold.

Both models are just as valid as each other, it just depends on which you prefer, and which one is more appropriate to a particular set of circumstances.




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