Tuesday, November 20, 2007

Why FREE can’t always compete against PAID?

I work with an Internet group whose flagship business happens to be an online matrimony portal. A member must pay a minimum of Rs. 1590 to use the portal. This gives them access to contact other members registered on the portal i.e. other members looking to get married.

One question that I've to put up with on several occasions is – What if someone else starts a similar portal and provides the same service absolutely free. Wouldn’t this undermine your company’s business – why would customers pay you?

Here’s why:

  1. We are in the matrimony business. People who intend to get married do not mind paying a sum of Rs. 1590 if it is going to help them find a life partner.
  2. Also, a paid membership also means that they are serious customers. Otherwise, an Orkut/Facebook would have put us out of business.
  3. Most importantly, customers are paying us because we have a huge user base of other customers who want to get married. And we have spent and shall continue to spend a huge sum of money to get these customers. A new portal would have to spend this huge sum to get these customers – and if they offer their service for free, what business sense would it make for them?

7 comments:

Prashanth said...

hey abi, you missed commenting on this...

Nimish V Adani said...

:) yup abi... i've commented on every post on your blog.

Abitha said...

Yeah, Nimish, you were the first to comment on the blog and have been very consistent with it too! Appreciate that a helluva lot :) ...consistency is not one of my strong points...but tell you what I shall seriously make an effort where your blog is concerned...what goes around comes around...adding your blog to my blogroll....it would be nice if u do the same...cheers

Nimish V Adani said...

abi, i still need to customize my blog to add the blogroll... shall do it soon.

Asher said...

On a more serious note, the matrimony space may be very specifically attractive to the Indian subcontinent and the social and cultural values here, while larger international players can employ a "Free" service strategy and beat the existing players at that game. I doubt the Indian matrimony market itself is big enough for them to interest them. And yes I new smaller player will have a very tough time catching up…

Sowmi said...

asher,

i dont think free sites would work anywhere where privacy is required. and privacy is not something that is specific to the indian market. Whether it be matrimony or dating, reliability is foremost and paid sites seem to be the easiest way to enforce it. that is why there are not many free dating sites that have worked. free networking sites work because they remian impersonal...
unless someone thinks of a new way to keep it free and enforce legitimacy, and in addition make it productive to their core business...

Asher said...

Sowmi,

I totally agree, that being the limitations of an example like matrimony, which for the most of us is an ultra serious once in a life time affair.

And we will pay for it, if it means we can avoid bad experiences and ensure privacy. That leaves us with the question of how much of the 1600 is to ensure privacy keeping the riff-raff out and how much is for database access, can the latter be eliminated as you pointed out with an alternative revenue stream.

Just came across this, the latest from Chris Anderson's LongTail blog. Makes the point for free and how businesses like airlines have transformed their revenue streams.

http://www.longtail.com/the_long_tail/2007/11/a-flight-across.html