A Business Is Not A Charity

December 07, 2011 by Gabe | [mmd] |

Over on the Pinboard blog Maciej is reminding everyone that we get what we pay for. If you love something that has no sustainable business model, expect disappointment. I agree with him completely. But in a continuation of the discussion, Patrick Rhone on Minimal Mac makes the suggestion that users should make a donation to Tumblr. I do not agree.1 I say "DO NOT DONATE!!"

Get a Business Model, Hippie

A real business should have a business model. Too often the business models for internet start-ups begin with a technology plan and end on the second page with "Get bought by a huge company for lots of money." That's not a business plan. If you have a few weeks to kill, sit down and draft a real business plan that you could take to a bank for a loan for real money like real businesses do. It's hard. I've done it and it forced me to stop dreaming and really consider how to make a living with the ideas. Central to a good business plan, is defining the revenue model. To omit that is to omit all respect for the bank and your partners and employees.

I Avoid Free

The young and significantly more poor graduate school version of me loved free. Grad students are notorious for scrounging free food and beer from any social event within walking distance. I've eaten my fair share of free pizza and drank free beer but now I pay for my meals and software.

When I see an app on iOS that is free, I immediately check to see if there is a paid version. I would much rather spend a couple of bucks to ensure that I get updates and patches than get a free app that is abandon-ware. I prefer to pay rather than rely on ads or in-app purchases.

When it comes to online services, I also loath free. I pay for Pinboard.in, Dropbox, Spootnik.net and Instapaper and I expect (and get) something in return. I get good services that continue to grow. I also expect customer service and get it too. If something breaks, I get accountability. That's a service oriented business.

Customers

There's been plenty of discussion about Google and Facebook and what is "the product" and who is "the customer". You really don't need me to provide links. Just do a Google or Facebook search. Often your data is the product and advertisers are the customers. You are not a Google or Facebook customer. You should have no expectations of privacy or service. So who is Tumblr's customers? I think it's VC's. Maybe their customer does not exist yet? Maybe it will be Facebook, Google or Microsoft. It certainly is not their user-base that pays nothing. If I'm not sure who their customer is, I sure as hell could not tell you what their product is.

Respect

I have a problem with a "business" that relies on donations2. It lacks respect for everyone involved. If you think you have a valuable product, then sell it. If you think your product can not compete then give it away. But I'd ask "why are you even making a product". It's much easier to get market share when you set low expectations. Free is a pretty low expectation.

I think that many internet companies choose a free model because they fear that they can not get traction if they charge for their product. That tells me that they do not value what they are making. But I also think there's a second reason. They want to provide a product without customer service. Once they charge, they owe their customers something in return. They owe customers explanations when things are broken.3. They owe them respect. I'll respect them enough to pay for their service.


  1. Friendly disagreement of course. 
  2. Let's be clear. I like charities. I'm a liberal and think that charities are a sign of a culturally advanced civilizations. If you want to quote me for this article, here's one: "I'm in favor of charities" 
  3. I'm not saying that every premium service provides an explanation, just that they owe one. 
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