Seven years ago, First Round Partner Josh Kopelman wrote a seminal blog post on the importance of free services in consumer-facing business models. He argued that most entrepreneurs misunderstand how subscription pricing works and assume that as price goes down demand goes up in equal measure. Instead, he suggested that price affects demand to a point, but the relationship is far from linear — there is a gap between free and any other price. This gap is known as “The Penny Gap.”
Years after the post was written, WhatsApp used a novel approach to solving the Penny Gap while creating one of the fastest growing mobile networks on the planet. And while WhatsApp built an incredible product that solved a real need, their understanding of the Penny Gap may have been their shrewdest product move of all. In this article, we explain why, and how this knowledge can help your company and apps succeed.
Click through to the First Round Capital Review to read more...![]()
Click through to the First Round Capital Review to read more...
