How-to: Business Models of the Free Website Builders

Business Models of the Free site buildersThere’s a plethora of free website build and hosting services out there; Weebly, Yola, WebNode, Jimdo to name but a few of them. It’s a gold rush akin to the free email boom a while back, or to the Cloud Storage explosion running alongside. The question, if these services are free, is who is paying? To quote author Charles Stross “…if you are not paying for the product, then you are the product.”

Any start-up company offering you a free service is getting money from somewhere in the short term – be it individual investors or venture capital funds, banks, or the owner’s own mortgaged house. This is not a long-term strategy. There are only three answers.

1. Build up the company to a level of interest to a bigger company, then sell it on.
In this case, every new user increases the profile and company’s market For the free site builders, every free site you publish is marketing their product, saving the company many marketing dollars, further increasing their valuation. At which point the value of the company brand and reputation further increases in value. Not to mention the value in the details of the customer base using the free service to potential buyers looking to up-sell, cross-sell and cross-market.

2. The ‘freemium’ model. They persuade you, the ‘free loading’ customer, to upgrade to a premium service and pay them some money off the back of the delightful free service you’ve been trialling. The freemium business model is a proven strategy for start-ups and for establishing relationships with new customers – for as long as they can stay in business.

Freemium can include the rather exorbitant mark-ups on custom domain registration fees and various add-on features for unlimited space, media players, scripting, email hosting and the like.

The service owners then play the numbers game, hoping that the conversion ratio of paying customers to free loaders will be sufficient to cover costs (both premium and free loaders) with some margin for profit on top.

You can see this more readily with the Cloud Storage providers – all those gigabytes of free space lavished on a bunch of free loaders in the hope of converting just a percentage of them to paying customers.

If neither is the case, then there is only one route left (excluding altruistic charities of course, and I don’t know of many of those in the technology sector);

3. Advertising. Either they’ve got advertisers who pay for the service, or you split an ad deal with the service provider or another third party.

Advertisers will pay for screen real estate and click-through’s generating measurable revenue. In which case you and the visitors to your site are the product for the advertiser; something the free site-building service got you to build for them to advertise through.

It may be that the service provider (like Weebly) offers an advertising split on Ad-sense revenue. They host the site, you bring in the traffic and they split the Ad-sense 50-50 with you. Great! Although, if you can bring in enough revenue to make it worth a split, you’re putting in way more of your effort and online reputation to be giving away half your revenue.

Customers lock-in: this is where less scrupulous providers try to make up the revenue. Offer the most basic service for free whilst obscuring the extra charges for all the ‘standard’ features you will need in short order if you’re serious about your site. Make sure to charge for data migration or withhold it altogether; lock-out domain transfers and forwarding from other sources. Lock the customer in so that upgrading to premium is less of a pain than leaving with nothing and starting again somewhere else. The mobile telco’s do this all the time.

Backers are looking for two things; organic growth in revenue, or growth in the company valuation in preparation for sale.

You can fully expect some of these Free Website builder services to fail. Others will be successful enough to justify a buyout by larger companies, who may or may not continue the service as is. More likely a new owner will change the service to maximise revenue on their capital outlay for purchase. That means less freemium, more charges and possibly, lose the least profitable customers. The promises of the original owners mean nothing. Banks do it all the time. Welcome to capitalism, comrades.

And that’s fine by me. In the free-wheeling, commercial world in which we live, nothing remains free forever. Just make sure you’re not held hostage.

Before you even start down the free site builder service route, you need to do two things.
1. Evaluate your needs for the short, medium and long term. Map out the facilities or modules available in fremium and premium plans; if you’re going to need email and a forum plug-in in a few month’s time, make sure there provider has them and at a price you’re prepared to pay; otherwise go elsewhere.

2. You have to have your exit strategy mapped out.

  • Have a backup plan for your website, the same as you would if your were with a paying hosting provider. You need to be able to migrate to a different host if your current provider changes its’ business model or goes bust.
  • Use a Custom Domain instead of a sub-domain of the free service provider. Build your ‘brand’ with your visitors based on the custom domain name and don’t get tied down with one provider.
  • Backup your entire site content so you can host it elsewhere. If your provider doesn’t give you an export or archive capability, that means keeping a manual copy of page text and images so that you can quickly reload it elsewhere.

Even if you think you can live with the freemium basics, bear in mind most of the free site builder services are aiming for maturity in the market where they can offer fewer or no services for free and can get paid subscriptions from all their customers – and that means you. AJS

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