Free Services Turn Into Paid Ones. How Fair Is That?

Yesterday I received an interesting email from Plaxo providing me with an “important service alert regarding the Plaxo Toolbar for Outlook. I have used Plaxo toolbar in my Outlook for some time, mainly as a tool to back up my contacts online so I received the email as their user.

The email introduced me to the fact that Outlook Synchronization, the feature that used to be a free one to all Plaxo users, will become available to Plaxo Premium subscribers only starting July 30^th. Their existing users are offered a benefit of 20% lifetime discount on Plaxo Premium to make things feel less bad for them so where regular users will pay $60 annually, existing toolbar users will pay less – $48 a year.

Honestly, even though I am not a heavy Plaxo user (well, maybe even half-user only) and have no idea why I would use the premium features even if they offered me to use them for free, I think that this approach to working with your existing customers is an embarrassing one.

In fact, using Plaxo toolbar has been fun but not really that useful to me. I do have my contacts on Plaxo just in case but I would not say I visit the site often – even after they introduced the lifestreaming functionality, simply because combined with my FriendFeed activity it would have probably become kind of too much lifestreaming to handle.

What’s more, I was once even mocked for sticking to Plaxo which is obviously not a blogosphere darling these days. The thing is that after I exchange a couple of emails with a new person in my Outlook email client, I tend to check the email using both LinkedIn toolbar and Plaxo toolbar. And if I find this person in one of the networks, I send an invitation out. In fact, this is the procedure that is responsible for probably 80% of my LinkedIn contacts and some smaller part of my Plaxo contacts.

So once when I performed this procedure with a well-known technology blogger (I will not share the name here as I am not sure if this person would tell the same in public or not), I got a connection confirmation from him on LinkedIn and a direct message back to me with a blunt question: “And who uses Plaxo these days at all?” I felt very last-century after this question – even despite of the fact that keeping my contacts on Plaxo and sending these connection requests via Outlook toolbar were my only Plaxo-related activities.

No wonder that a while back when I migrated to a new computer, I decided to refrain from installing Plaxo toolbar again and only preserved LinkedIn toolbar in my Outlook as it now seems more than enough to satisfy my networking needs. So basically I can hardly be qualified as a real Plaxo user and have no reason to be offended – yet this is exactly how I feel after this dubious move.

As my loyal readers already know, I am all for the web startups experimenting with their revenue models and expanding the number of revenue sources they rely on for support of their innovation efforts. The recession has made it a necessity for many of the web services that used to be entirely free to come up with this or that idea on how to generate revenue off their services. But some examples are certainly beyond my understanding.

The recent one involves Box.net. This online storage and sharing service has always been one of my favorite ones for when I had to share a relatively large file with someone – and email or Skype did not work for the purpose for any reason (which actually rarely happens at all). Last week I had to send 8 Mb in two files to a customer who requested me to upload the files to some online storage service instead of simply emailing them.

I have not been using Box.net for a while and was not aware of the changes that are currently there (and I did not pay attention to whatever email or blog notification the team could choose to communicate it to their users) so without thinking twice I headed to the service, logged into my account, created a new folder and began uploading two files (4 Mb each). Now imagine my surprise when I saw the progress bar claiming I had to wait another 13 hours for the files to be uploaded – and a prompt to upgrade to a premium account to enjoy a faster speed. Of course the only thing I could do was cancel the upload and head to another service (the ancient YouSendIt) that took me some 5 minutes to send the very same files.

I mean, I am not unwilling to pay for services and tools that I actually need – be it for work or for fun – but services that I only use occasionally will rarely get a subscription payment from me, especially if there are plenty of free alternatives.

I am not sure if degrading a service is legal at all but while it is understandable when a company looks for new revenue sources, making the conditions significantly worse for their existing customers is hardly an option – especially when the competition is fierce in your market. For Box.net the competition is absolutely immense as I can’t even imagine how many companies work in the online storage market and some of them offer better service (both in terms of the features and in terms of speed). And Plaxo certainly does not enjoy the position of a market leader to be able to enjoy the premium fees coming from the users that have no other options but pay them.

So really, doing something like this to me means nothing but losing your existing customers – no matter what innovation you want to fund with the money generated off the new fees. The usual option for all the startups I know is to keep the existing basic functionality free forever and making some new features paid-for – if this is their revenue model. Coming up with a new feature that your users will want to have and will need to pay to be able to use it is just fine but trying to make people pay for what they used to get for free is a very different thing – and it certainly does not smell good to me.