13 people says things!

1. Excellent post, Scrivs, he said, in fanboy-like adoration.

   I like to think, in my own smug way, that what’s being discussed here is actually the “value.” I say that because that’s something with which my team is currently struggling.

   Where is the value? And more importantly, where is the value to the market? Where is the value worth paying for?

   If you build something that the market would either a) have a hard time justifying with a cash investment or b) completely refuse to pay for, then are you really delivering value beyond the value you derive out of it?

   And if you believe that you are delivering value, but the market still doesn’t get it? Then, it’s a communications issue. You’re not communicating the value to the market. This is why designers often get stuck in low-cost or free services: it’s really difficult to communicate the value of good design to the ill informed.

   Like you say, if you continue to give everything away, you’re communicating that the concept–as a whole–is worth nothing. That it has no defensible value.

   The hybrid solution is the key. The “loss leader” or “dollar menu.” Give part of it away, lose money on it, but make up for that loss with the truly valuable service.

   Finding that fine line where free ends and value begins? It’s a tough one.

   Here I go, hogging your comments, again. I’ll bow out.

   By Rick Turoczy on March 1, 2007 2:13 pm

2. Rick,

   You leave me with two options:

   1) Ban you from commenting on this site.

   2) Make you co-author since you seem to summarize my posts with more clarity than I could ever imagine.

   I think you nailed what is so frustrating to me. I do understand that some models are simply made to be ad-supported so don’t think I’m knocking everyone that does it. It’s a healthy way (if done right) to make a living, but most of the time we create things because we see a value in them yet we feel we have to give them away. So does that mean that when we are creating something of value we don’t think other people will see value in it?

   By Scrivs on March 1, 2007 2:36 pm

3. “Let’s ignore the grammar and…”
   Ooo… That was collldd, haha.

   This pricing discussion is always being thrown around in business and it’s the silliest thing. Some say you have to undercut competition, some say you need to inflate pricing to seem ‘more professional’ and both are right in their own context; but realize the context is the more important factor than price.

   If your product/service/knowledge is shit, then your prices should reflect that to be successful (whatever it is that constitutes ’successful’ in your product/service/knowledge). If your product/service/knowledge is unique/extraordinary then your prices can/should reflect that. Your context in this case marches alongside your worth. Your price should reflect your worth. You should get rich. You should marry a super-model. You should live happily ever after. You should break me off a piece of your bank account. You should find ME a super-model. Well, I’m rambling… But you get the picture.

   By Chris Mewhort on March 1, 2007 2:40 pm

4. Scrivs,

   Sneaking in before I’m officially banned. ;)

   I think I’m seeming a little more clear than usual, because I’m in the midst of the same struggle. Trying to step outside of my ego and say “Yeah, but all things being equal, would I ever pay for that?”

   To get even more succinct: it’s a can versus should issue. I know I can build this, but should I build it? And if I think I should, I know people can pay for it, but should they pay for it?

   This also gets to Chris Mewhort’s point: is it worth it?

   Why are we struggling with this? Because anyone can build any number of things using the infrastructure at our disposal. I think you and I are struggling with the same issue. Will anyone else find this valuable or am I just fooling myself? Should I forego the risk and give it away or should I charge people for a certain level of service?

   Maybe I’ll just wait for you to figure it out. And then follow your lead.

   By Rick Turoczy on March 1, 2007 3:15 pm

5. I wish someone would hurry up and contradict you, Paul, so that I could jump their shit.

   I, for one, never understood the mentality of free being the norm or the expected. “Free” should be a happy bonus, not a requirement. It shouldn’t even be the icing on the cake; it should be like finding a $100 bill on the ground on the way to the bakery.

   Why would anyone offer features or product whose value they question? In what some people call “real life,” no one would open a store full of, say, buttons, and then turn around and say, “Hm, you know, I really don’t think anyone would even want a button or think it’s worth anything. So I’m going to go ahead, open this store, make a shit ton of buttons, and give them away.” Actually, as far as I know in real life people will sell the shit out of those buttons anyway in hopes of making a quick buck.

   If you build something of value and decide to give it away because you’re generous and think you can make revenue elsewhere, great! If you put a ton of time into something, figure it’s not worth anything, and then decide to give it away, fine! But if you are a spoiled brat who spends all of his/her time doing things rather than creating things, you have no place in demanding anything for free. And by offering products of actual value for free because you need to compete with others who do the same…well, you are simply catering to said spoiled brats and not a clientele of people who actually give a shit about your product.

   My (somewhat ranty) two cents. ;)

   By Richard on March 1, 2007 4:52 pm

6. Actually, I’ll disagree (only becuase someone challenged for a disagreement).

   The explanation is pretty simple: expectations.

   When restaurants were first opened nothing was free. It was all expensive enough that restaurants made a profit. When the Internet first came live, *everything* was free. Paid services came second.

   In the service / restaurant industry, massive competition happens. You get free playgrounds and kids toys, family bathrooms, contests. Lots of free stuff, but the food is still priced to make a profit (either at volume, like McDonald’s, or at a higher price-point for value like many other restaurants).

   In the Internet industry, there have always been significant barriers to charging for things, including:

   1. Actually getting people to give you your CC number. There’s a reason early porn sites used 900 numbers and such, because it was more trusted (which is weird, when you think about it).
   2. You’re going against the culture and established norms.
   3. You need to teach people to trust you (Verisign and all the other early certification systems).

   The truth is there’s very little in common between today’s web phenomena and fast food restaurants. Web companies *need* to give things away for free in order to lure customers (ie: 37signals, for example, gives away more than 80% of their accounts). Restaurants need to entice customers in with “extras”.

   Ultimately, it comes down to history. The web was built on ad dollars. The restaurant industry was built on revenue/customer.

   Not sure if I’m really disagreeing or not, but I gave it a serious go ;)

   By Jeremy Wright on March 2, 2007 11:11 am

7. I couldn’t agree more with Scrivs and Rick Turoczy. I have struggled to gain clients in my own Web design business, and I don’t want to give away my services just to beat competitors.

   I have done Google searches to check out my local competition, and I see designers who are giving out awful products for a high price, and getting away with it.

   My problem is in communication, and I don’t know how to overcome it.

   By David Mulder on March 2, 2007 3:07 pm

8. I always liked Jason Fried’s explanation of what constitutes a Pro account in that “you should charge for what costs you money”. The stuff we’ve got at my.9rules now took us only a few weeks to build (started it after New Year’s) but the stuff that’s coming forth has been in the works for awhile and is costing us more “money” because it’s more complicated, more interactive, and took more time to build. The things that may or may not comprise the Pro account we may or may not have soon go above and beyond the current offering, so in that case I think the offering will justify the cost.

   By Mike Rundle on March 2, 2007 4:12 pm

9. Well, I’ll bite Jeremy, but I can’t jump your shit because you’re only playing the devil’s advocate. ;)

   I could argue that when services and product starting being accepted and available on the internet, it wasn’t free (unless, of course, you’re counting file sharing or the early peer-to-peer networks). The truth is, it doesn’t matter. There’s plenty of proof that people attempted to make money off the internet; you only have to look at the zillion dollar porn industry or the slew of unemployed dot com experts in the late 90s. Sure, there were barriers to charging for things. But the biggest barrier is that no one cared. No one wanted those things, and it was too hard to get them. (Except, again, for porn.) The truth is, it doesn’t matter.

   The point is that those days are gone. The only people who still hope for free things on the web are big web nerds like you or I who have been on the internet long enough to know there’s free stuff out there and are used to Open Source and all of its misunderstood gifts to the community. Real people, i.e., people who want a service or a product and who may or may not be web-savvy, follow the same rules as everyone else: they want something that has good value.

   I think the biggest mistake anyone using the web to offer a service or product is to think that web-based companies need to give things away. Sure, they do (give things away), but if you’re offering something that has value, you don’t. The reason why McDonald’s gives toys away is because they’re wooing kids who don’t give a rat’s ass what a hamburger tastes like.

   The web is not built on ad dollars. For Google, yes; for most blogs, sure…but sooner or later all that advertising leads to something for sale and that’s where it all starts.

   By Richard on March 2, 2007 6:24 pm

10. No argument from me Richard, I was just showing why free’s so prominent here, and never will be in the service industry :)

    By Jeremy Wright on March 2, 2007 8:05 pm

11. This was one terrific article.
    I would agree with Paul on the matters that are frustrating for any web designer (or the likes), without doubt.
    But I have to agree much more to Jeremy, there.

    By Sumedh on March 3, 2007 4:30 am

12. [...] Mar 3, 2007 in India Internet, Learnings, Business Scrivs has a interesting post on “Why there is no Ad-Supported Fast Food“ “If McDonalds were to go the Web2.0 route everything on the menu would either be free or under a dollar with a huge ad slapped on the packaging. Or maybe they fill your bag with more junk than your mailbox just to push some burgers into your lap. Hell, it makes sense to me and they have to do this because of strong competition from Burger King and Wendy’s. [...]

    By Amigos Daily on March 3, 2007 4:34 pm

13. My husband and I are a web design start-up and that is so true about people selling themselves short. He really didn’t know what to charge and he was going to charge about half of the price that he charges now for his services. Luckily he realized that we needed to look into competitor pricing and then he raised the prices a lot more. Thanks for the article, it was a good read! :)

    By Web Design Minnesota on May 8, 2007 11:57 pm

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