Ruben Gamez from Bidsketch took time out to share his experience on the free vs. paid model on Softwarebyrob.com. I found his experience really interesting. I use a number of online software services for various different things. With some of them I have a simple free account while with others I gladly dish out the money to pay for the premium account. I think that most users who are looking for a service provider are willing to pay for the extended features if it’s something that they REALLY need to use and there are no alternatives to it.

I’ll use my Pandora account for example. I love Pandora. I don’t however, use Pandora every day, nor do I listen to my Pandora stations for hours at a time. For me, it’s not worth paying for a premium account with its full set of features. If Pandora were to limit the length of time you could listen to your stations per day or limit the number of stations you could create on a free account would that make a big difference to me? No. I’d still keep my free account. However, the user who LIVES with their Pandora station on every day, or the place of business that uses Pandora to stream music at their place of business, they are much more apt to go for the paid account.

In the end, it’s really dependent on what how your users use your service and if there are alternatives for them out there on the Web. If Pandora eliminated their free accounts altogether would I immediately upgrade? No. There are plenty of other service providers out there that offer a similar service for free. Pandora knows that and just finds a way to capitalize on their free accounts. That’s that key. Learn to make money even off of your free account users. The revenue doesn’t even have to pay for the costs of the free accounts, just brining in a little bit is a great start.