Why “free” isn’t a good price point

Posted on by

There’s so much to love about getting something for “free.”

There’s the emotional reaction… it feels good to get something for free.

There’s the financial aspect… “free” is a great price point on your wallet.

There’s a visceral reaction… “free” breaks down most immediate barriers and suspicions – you have “nothing to lose” so you just go for it.

It sounds great. Why wouldn’t you want something that feels good, has no impact on your wallet and is an easy choice?

Because “free” simply isn’t sustainable when building quality products that require continuous innovation and development.

Let’s take the website business. Back in 1994, it was expensive to get a website. You could hire a developer for tens of thousands of dollars if you were lucky. Towards the late 90’s, companies like Geocities popped up and made it inexpensive to get on the web. Much later companies like MySpace and WordPress popped up, and eventually pushed the price down to “free” for a basic website.

So today, are the majority of websites made for “free?” Yes – by consumers. But the majority of professional websites are still paid for. Even people that get WordPress, which is free in its basic form, often spend hundreds to thousands of dollars on a developer, template, plug in, etc. to customize it to their needs. Magento, a great open source ecommerce platform, is free at its core, but to get it to look and feel like you want, it costs money.

Free only works at scale. Facebook is free for consumers. But Facebook had to raise nearly a billion dollars to scale to the point where advertising, virtual goods, and business partnerships made up the financial slack to get it to break even.

WordPress is free. But WordPress makes money with professional services and custom templates, and has a vibrant developer community surrounding it that charges for professional work. Same for Magento. In both cases, it’s the developer community that surrounds these “free” platforms that pushes it forward and continues to innovate.

MySpace is also free… but they’re losing a lot of money in its current form. Their scale no longer covers the base cost of innovating on a massive scale for their users.

As a long-term play, “free” is a crap shoot. The majority of “free” platforms are either brand new (and yet to be proven if they can remain free or survive) or have reached a massive scale to support their efforts through advertising and enterprise services.

Fast forwarding to our industry – mobile apps – it’s the wild wild west. App developers are:
1) developing custom apps
2) developing platforms (like Mobile Roadie) that lower the cost dramatically
3) giving apps away for free and monetizing “later” through revenue sharing on paid apps and/or in app advertising.

I founded and ran a digital agency for 11 years so I understand the custom game very well. And while there will always be a place for it, it’s not sustainable for the majority of customers. There’s a lack of ROI and flexibility investing tens of thousands of dollars in a custom app, which is the exact reason we started Mobile Roadie.

In the platform game, prices range from $99 to $10,000. Some charge monthly, some annually, some just once. Platforms offer a variety of functionality – from plugging in feeds on the low end with minimal or no customization options, to a fully customizable experience on multiple platforms. These platforms continue to innovate because they are paid services and have a vested interest to do so with their customers. And I would dare say that the ones that innovate the most aren’t the bottom of the barrel in price.

Then there’s free (or the equally unproven “rev share” models). With a “free” app you get what you pay for. There isn’t the same attention to detail when it comes to design, technology, customer support, and feature set.

One of the biggest complaints we hear from users of “free” apps, and brands looking to upgrade, is that users aren’t engaged. If you don’t have a great user experience and the tools to update it often, users don’t come back to the app. Suddenly, your app that didn’t cost anything isn’t being the effective marketing/sales tool you hoped it would be.

Businesses need motivation to continue to innovate and an important part of that motivation is financial. We all want to provide the best possible product for customers and best experience for end users but we need to be able to afford to do so.

Mobile Roadie is a technology company at its core. We release new features and functionality every single week. We do major updates every month. Our customers get the benefit of this innovation, and don’t have to chase what Apple, Google, or Blackberry are doing next. We’re on it, and our clients can focus on their brand and own customers.

You’ve heard the saying “you get what you pay for” a million times. Nothing is truer in the app space. Beware of a “free” or “cheap” app that is the “same” as Mobile Roadie or any other premium platform. Do a side-by-side comparison of features and see which is going to help your business and customer relationships in the long run.

If you’re serious about the app space – and you’ll only be successful if you are – you have to put a quality experience out there or risk your app going into the oblivion.

3 thoughts on “Why “free” isn’t a good price point

  1. If you guys keep innovating and adding value to the moro platform for users you will remain to be successful.

    One other thing while I am posting. Why do you charge more in Europe than in the US for an App ?

Leave a Reply

Your email address will not be published. Required fields are marked *