Freemium is the new black

An article by Claire Cain Miller in today’s New York Time proclaims: “A Web Start-Up Counting on Ad Sales? Good Luck“. The article isn’t kind to the ad-supported model in general, but the particular concern is for startups. The article quotes David Weiden from Kholsa Ventures:

“The ad model is somewhat worse but not radically worse,” he said. “What’s worse is getting funded that way.” If a company approaches investors with a plan to lose money for three or four years while building an audience, it will encounter many closed doors, he said. “It’s gone from plausible to almost implausible.”

The preferred alternative is the “freemium” model: offer basic services for free, and upsell advanced or special features. I marvel how it’s controversial to talk about charging for services. But that’s what happens in a world where people have come to expect information to be free–an expectation that the current economic conditions will surely reinforce.