A modest annual fee model for the internet, the most attractive business model?
A modest annual fee model for the internet, the most attractive business model?
When you are launching your service/product online, the most attractive business model on the internet is to offer the service for free.
It let the service grown quickly and users can gain a quick understanding of the service without risk. But when the service is a success, what is the next step?
The first issue to solve when launching your service online is to grown, so free access is the easiest way to do this. Then the next issues is to handle the growth and how to handle the headaches of growth like spammers, how to scale the infrastructure, how to handle quality issues etc.
I believe that the best way to go is a modest annual fee model. You charge a small amount of money for one year. This can be very small meaning between 1 and 49 euro a year.
The mathematics of the internet is like playing with big numbers, this is certainly true when we are talking about a success stories. Look at Face book, 350.000.000 users (read 350 million), multiply this with 1 dollar, that is 350 million dollars extra income.
This is much more then what they earn now. The same for Twitter, they will earn millions of dollars and much more then the 0 dollor they earn now.
This money can be invested in extra growth, in advanced infrastructure and in creativity by hiring employees.
Will everyone pay? Will they loose people?
I guess they will loose some users and not everyone will be ready to pay, but when the price is acceptable and low, and people thinks the service offers them something extra then yes they will pay. This is a basic economic law.
But as the service is so common for most of the users, like Twitter or FaceBook, I am convinced that people will pay a modest annual fee.
What about smaller web companies?
Even they can win with a modest annual fee model. The question you have to ask yourself is do you need 350.000.000 dollar (read again 350 million) to run your company? No you don’t, but it would be nice 
The fact is if you are charging a modest annual fee you generate a stable income to help grown your service and making more profit in the end.
Most of the great services on the net disappear, because the company behind it can’t pay for the huge investments related to the growth and their own success.
So my question to you is:
How do you handle the growth of your online service?
Are you thinking of to ask a modest annual fee to your users? if not what stops you to do so ?
Feel free to leave a comment on http://wp.me/pzuaJ-37
Frederik Van Lierde is Owner of Blue Oceans group, a private investment company. Blue Oceans group invest in entrepreneurs whith great ideas and loves the world of business and try to think what can we do better.
Leave a Reply
You must be logged in to post a comment.