I’ve had a few “genius” startup ideas come to head that would monetize by charging customers for some online services. In my mind these would all churn out money faster than a printing press, until I really stopped to consider how rarely I pull out my credit card for anything on the web. In this low, I then started questioning B2C services as a whole. It’s basically my job to find startups that are hoping to make our live easier, and then write in detail about the value to consumers the startup provides. If I think about this all day,
Just as a side note, it’s funny how app stores change the game. I’ll pay €2 for an app without thinking about it, but if I’m sitting in front of a laptop I have completely different expectations about what should be free or not. Having your credit card stored somewhere really reduces the mental friction of the transaction, and it’s a pity that the traditional online startups we cover can’t plug into that river of cash.
Juha Huttunen from Grafetee points out that much of this may have to do with the concept of a reoccurring fee:
“For me personally the biggest problem with these services (as an individual especially) is that I hate the monthly fee model for services I see myself using forever (100 bucks a year for Dropbox vs. 100 bucks for an external harddrive to backup the photos etc., the free version is more than adequate for work). On the other hand I’ve spent quite a lot of money on apps for my two iPads and even on my Android phone and tablet. It’s easy to pay a few bucks for something if it is a one time fee, but it’s much harder to commit to paying 10 bucks per month on even a great service like Dropbox.”
Another entrepreneur points out, “For a service you need to think how to create a revenue stream from the users. Single pay is not enough, and builds barriers. Also, subscription works neither.”
Dmitri Sarle of Giosg tells us that it’s important to design a scalable model that has customers become dependent on the service, require paid functionality as they grow, and can adjust the pricing to fit their needs.
To do so, the freemium model has to hit the sweet spot of not being “free, but useless” (Some Live chat companies offer 5 free chat’s per month for free) or “amazing freemium with no need for a paid upgrade. Ever.” (PipFrog only offered SSL in their paid version at the very start). When it comes to services for start-ups then the service needs to make sure that as the business grows, the extra functionality that is offered by the upgrades will offer real added value to the users and it would therefore be a natural step for the company to upgrade to a paid service.
For instance, paying 26 USD per month for Pipedrive is clearly good for my business as I save more in man hours every single day, not to mention the extra deals that I can make. Moreover once I import 1 000 leads into the system and progress some of them through the pipeline in the 30 day free trial, I basically cannot afford not to upgrade anymore as I would lose all of this work and data. Real Value / Price balance + proper marketing approach is what matters.
We at ArcticStartup have thought about what services we really use, with a focus on regional startups. At the beginning of April, we ran an article titled Nordic & Baltic Startups That Keep Us Running and we picked out a few that we use weekly. The startups we included were Pipedrive (a sales pipeline), Cobook (an address book manager), Pixelmator (image editor), Spotify (music), and Minecraft (game). Added to that list, we also use Mynewsdesk (online newsroom) for keeping on top of what press releases are being published in the region.
Paid Business use:
The most frequently mention paid web services used at respondent’s businesses included Pipedrive, MyCashflow, GitHub, Pivotal tracker, Basecamp, Mailchimp, and Dropbox.
From the region we had a lot of others mentioned, including Cake.Hr, Savalanche, iZettle, Nettivarasto, ERPLY, Skype Out, Signom, Cuutio, Snoobi, Apsis, Procountor, and Flowdock, and Zendesk. Cross examining the responses, they seem to not all be self promotion, which was encouraging.
Other services that came up in business use included Pivotal Tracker, Mailchimp, Beanstalk,, Hootsuite,WorkEtc, Elance, Highrise, Salesforce, RightSignature, Jira, Greenhopper
Paid Personal Use
The most frequently paid for online services for personal use included: Spotify, Picassa, Flickr, Dropbox, and Github.
Others mentioned included Tvkaista, Balancion, Hootsuite, Freshbooks, Bluehost, Elance, Envato Marketplaces, and Mog.
Here is the rest of the data, including what free services respondents used, as well as their favorite services. I removed any longer responses, in case anyone was concerned about privacy.
