There’s been an interesting debate going on over the past week or so that gets to the heart of one of the deep-seated conflicts within the web startup community — namely, whether apps and services are better when they are free or when users pay for them. Dalton Caldwell, founder of Imeem, kicked things off by saying he is going to try and create a for-pay version of Twitter, and others cheered him on by saying that an advertising-based approach makes a lot of services less appealing than they could be. Venture capitalist Fred Wilson of Union Square Ventures, however, argued thatfree and ad-supported is actually the best model for consumer services that want to achieve a broad reach. So who is right? That depends.
As my colleague Ryan Kim has explained, Caldwell’s idea of turning an existing project of his — called App.net — into a kind of paid Twitter-style network grew out of an earlier post, in which the entrepreneur lamented the fact that Twitter had given up on being a kind of real-time information utility with a rich and open API and decided instead to become an advertising-supported media company (something I have argued is a double-edged sword for traditional media companies). This post got so much support, Caldwell said, that he decided to turn App.net into the kind of network that he wished Twitter had become.