VinFolio’s recent financial troubles bring up some legitimate concerns for Web Application pricing models. Too often web applications are built without consideration for sustainable revenue or long term impact on the user community. Many companies such as Vinfolio built web applications as lead generation devices. This method is wrong and too often ends badly when the generated leads fail to provide the anticipated revenue.
Like many web applications, VinFolio does not charge customers to sign up and use their cellar management tool, VinCellar. Customers can use this application to keep track of the wines in their wine cellar, receive real time cellar price evaluations, and interact with the VinCellar wine community. Why does VinFolio offer all this functionality free of charge? VinCellar is VinFolio’s lead generation device for wine storage and their wine auction marketplace. VinFolio pays its bills and payroll through commission on wine sales.
Sounds like a win win. VinFolio gets a steady flow of wines to sell and wine collectors get a great application to manage their cellars free of charge.
Not so fast. What happens if wines stop selling? What is the price of free? Now that Vinfolio is circling the financial drain, the future of VinCellar is in jeopardy.
VinCellar clients have invested many hours inputting wines into this system and adding tasting notes.
Vinfolio is not in the business of providing cellar management. The web app was a fancy lead generation front. VinFolio gave the service away in the hopes of profiting from the sale of the user’s wines. The problem is that the commission did not pay the rent.
VinCellar is a case of different primary benefits between the site owners and its users.
Primary – Keeping track of their wine cellars
Secondary – Interacting with the Wine Collector Community
Convenience – An easy way to sell wine
Primary – Selling users wines through the marketplace and auctions
Secondary – Storing user’s wines for a fee
Unlike other sites such as Ebay and Amazon where the users and site owner share common primary goals, VinFolio’s goals were not aligned with its users.
At Nimbletoad, we firmly believe that a site’s goals should be aligned with the users of that site. Web Applications should derive their sustainability from the user community. This can come either from subscription revenue as in the case of BaseCamp or Freshbooks, or from advertising such as Facebook and Myspace.