When developing a business model, every software and app start-up eventually faces the same core question: Should we focus on monetizing customers or driving usage?
For consumer apps, this question has been answered (or mostly answered): the best approach is to offer a free service to help attract and retain users. As Fred Wilson put it: “When scale matters, when network effects matter, when your users are creating the content and the value, free is the business model of choice.”
But what about enterprise apps? While free rules the consumer world, it can be a different story in the enterprise:
— Offering an app/service for free can send the wrong message. Here, free can be equated with low quality.
— While viral growth and network effects exist in certain enterprise settings, network effects are typically more limited in a B2B environment compared with B2C.
— Free isn’t necessarily sustainable with B2B. Acquiring business users may prove too costly, forcing start-ups to raise incredible amounts of money to finance aggressive sales and marketing efforts for a free app.