Fred Wilson is a well known venture capitalist who coined the term “Freemium” which is a business model where you offer basic services for free and make money through selling advanced services. His latest post is how Android will own the market in a few years because of its low price point.
I don’t follow VC blogs anymore because I have no interest in venture backed startups, but there is something very interesting in the comments for independent software developers in the mobile space. When talking about making money in the Android ecosystem here is Fred Wilson’s response:
we are not talking about selling software here
we are talking about web services, which are largely monetized with advertising
The takeaway is that if you want to sell software then the Android space is not the place to be. Building a company by selling software requires organic growth. This is antithetical to the current climate of VC business models. The current model is that you need a large and ever expanding user base with the potential for monetization (Facebook, YouTube, Skype, Flikr, del.icio.us). That monetization may never occur (YouTube, Skype, Flikr, del.icio.us), but the potential is there. You sell that potential to Google, Microsoft, or someone else with deep pockets and that’s where the VC and founders make their money. The business for the VC was in monetizing the company transaction not an actual product or service.
Hey, if that’s the way you want to play, I have no qualms. I’m just trying to highlight to developers and people interested in selling software on mobile devices that the iOS and Android ecosystems are two different beasts. If you want to develop a high quality app that you can charge money for, then you’ll have more success on iOS. If your application or service is geared more towards a free app with advertising then you’ll probably find more success on Android.
