Too many startups are still figuring out how to make money. A revenue model needs to do the job whilst you do your best to keep your customers. Are you still on the white-board brainstorming how to bring in the revenue from that customer who just signed up. I taught you will never ask for money. BUT hey there is no free launch. You are a business and you have to get that business model right, even if its FREMIUM it is still a business model.

A lot of startups always use the fremium as a bait to get consumers to keep visiting the site. In the long run something else will be sold to them or a third party pays. You either decide to be free or charge as soon as possible. Impressions stick longer than you think. A middle ground in the future has its own implications and costs. But of course the freemium model has its challenges. but It’s a great way to get early users to use the product and have a pool of potential people to upgrade.

Ning started as free and because its a business it needs a model to survive and grow so users are FORCED to pay or move. If you have a huge network, you have to find a way around it and that is frustrating. Consumers will understand that model you are trying to hide. Make it visible on your site and explain the different pricing packages, they will understand and make a choice between the free and paid options. A compelling product that solves a real problem will not be that difficult to sell.

In the early days, we need to be focused completely on getting as wide an audience/reach/user-base as possible. If we think about revenues/profits too early, it will undermine that growth. This is the philosophy a lot startups stand by and work with. According to Dharmesh Shah this is short-sighted. He thinks profitability should not be ignored and I agree with him.

Still figuring out is not good enough. Do not think you are going to monetize advertising better, remember Twitter, Facebook, Digg you name it , are still figuring it out. The earlier you start figuring it out the better.


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