I think this is a point too often forgotten by web entrepreneurs. A product has no intrinsic value - its value is in the eye of the user. This is also to say that every single user has a different value for how much they are willing to pay for your product (which may in fact be $0). Simply because something costs nearly nothing to make, doesn't mean you should sell it for nearly nothing.
> Simply because something costs nearly nothing to make, doesn't mean you should sell it for nearly nothing.
Software costs a lot to make, what is low is the marginal cost: the cost to create one extra copy. The reason costs tend to zero is: if the marginal cost is zero, it's very easy to get into a price war. Maybe you won't sell it for $49, but your competitor might be willing to sell it for $29.
