Tuesday, 27 November 2012

Asymmetrical business plans.

In 2006 everybody was saying that free is the future. If you can still find them, lots of articles said that free would be the new price point. I said that was bull and I often became unpopular and labeled an idiot in talks about the matter. 

Well, it's still bull for one simple reason: in order to make money you need to charge something. I understand the allure. Companies need a way to differentiate themselves and if somebody gives something away for free when others are charging they can find a unique business model that works for them. They get a lot of traction and other people hop on the bandwagon. Then for some reason this new business model is "the future" and it will always be like that.

What ever happened to just charging somebody money for a product. Let's look at the oil industry or the fashion industry.

Get the oil out of the ground -> sell it -> profit -> repeat
Design and produce the clothes -> sell it -> profit -> repeat

Let's look at an app model

Produce the app -> give it away for free -> hope to make money on ads -> get users to sign up and build a list -> sell another product on your website -> ??? -> profit? -> sell your company and retire to cancun.

Perhaps I have embellished the plan a little and yes there are ways to make money with ads, and selling lists and raising notoriety. However, as a business it's nice to have a steady cash flow at the end of the month and all of this other motion is unnecessary and frankly a waste of time.

On top of this is kickstarter. Why do you need money upfront. A lot of people on kickstarter just have an idea. Wouldn't it be better to produce a product on your own and make money from that? It makes sense that if you have a game idea then you should just make it and profit from it. But the problem with that is that everybody is giving games away for free and when you charge one measly dollar you are suddenly the worst person to exist on the face of the earth. 

I think there needs to be some awareness when it comes to software and symmetrical business models. How about something like this

Make the software -> sell it -> profit -> repeat

This way more small business can exist. With asymmetrical business models the money tends to concentrate. There are other factors such as saturation and piracy but in the end what you need to do is make money and the best way to do that is to charge it upfront.

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