Surprise! Internet companies start turning off the free, all you can eat buffet

In a post today on Techcrunch, Jott, a voicemail to text service announced that they are no longer providing a free service, much to the disdain of the Techcrunch comment stream. I hope this is the beginning of a new trend, not getting something for nothing. Previously, Jott was an ad-supported business but with the implosion of the ad markets, it isn’t a feasible business model. I must say that I’m estatic, and I hope this continues.

Speaking with friends and family that have nothing to do with the Internet space, saying that you’re offering your application for free seems insane. Although the marginal cost per additional user is very low, there are still high fixed and variable costs of operation. Yes it didn’t cost a million dollars to build it, but marketing it, whether through paid or non-paid channels is extremely expensive.  The problem was, 8-9 months ago, it seemed like there were 10 companies launching in your space a week. Basic economics will tell you that the price would have to drop to zero, thus hoping that you’re users clicked more ads than my users. It was insance and unsustainable. Now, there are very few new guys launching on your favorite tech blog and more guys dropping out of the race or slashing their teams.

To me, this is simply a market correction that needed to take place. If I were Jott, I wouldn’t charge previous users of the service, because they are probably early adopter techies or loyal users of the service. I’d grandfather them in, and let them continue to evangelize the platform. But I’d definitiely charge every single user from here on out. Over the next couple of months, I anticipate more and more of these “time to pay” strategic moves. Hopefully it will enable us to all aim to create value, and not focus on how to flood the market to get as many eyeballs as possible, which in the end, is better for the end user.

Update 3-19-09 The Economist has a good article saying many of the same points that I have illustrated. Click here


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