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The idea is that the economics of the Internet work for two types of businesses:

• Massive businesses that can take advantage of the Internet’s scale to reach a huge number of people very cheaply and efficiently.
• Niche businesses that can take advantage of the super low costs involved in running an Internet business to reach a very narrow niche of people all over the world very cheaply and efficiently.

(…)

With this audience there are two ways to maximize revenue:

• You can try to make a little bit of money from a lot of people – this entails getting a little bit of money from everyone on the curve.
• You can try to make a lot of money from a few people – this entails maximizing the gain from the people on the left side of the curve.

(via Dear Zoë Keating: Tell YouTube to Take a Hike – Stratechery by Ben Thompson )

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As a general rule: with IAPs, go big or go home.

Jeremy Olson (via Yep, paid apps are dead « Tapity )

The future of sustainable app development is to give away as much value as possible and empower those who receive more value to pay more for it.

David Barnard (via Blog: The Sparrow Opportunity )

The most precious commodity is user time

(…) Revenue follows user attention, not the other way around; unlike money, there is a finite amount of minutes in the day, and a finite amount of users. To put it another way, attention is a zero sum game

(via Instagram Direct, Twitter DMs, and the Social/Communications Map )

This certainly applies to all ad-based businesses, where volume is key! But there are other ways to build successful businesses though…

Zip drives ate floppies.
CDs ate Zips.
DVDs ate CDs.
SD cards ate film.
LCDs ate CRTs.
Telephony ate telegraphy.
Text messaging ate talking.
Tablets are eating our paper …

Great analysis of the disruptive effect of The Magazine in the publishing industry.

Free is only a tactic, not a business model.

Free: a Tactic, not a Business Model | Tech News and Analysis

… my primary point was to state that many people (mistakenly) believe that getting a consumer to go from “free” to $1/month is just as difficult as getting someone to go from $1 to $2/month. I think that there is a huge burden to getting a consumer to pay anything — and entrepreneurs tend to underestimate the level of effort.

(…) 3 different types of products out there:

In the first case, we have something like purchasing food. Immediately that hamburger has a lot of value (you’re hungry right?) but after you eat it, the value is largely gone.

In the second case, there are products that deliver the same amount of value to you every day. A newspaper subscription is a great example of this. Every day it shows up at your door and you get the same value from it each time.

In the final case, you see a product whose value increases over time. On day one, you haven’t invested much time into it and you probably don’t even understand how it helps you. However, as you use it more and more and put more into it, the value because increasingly clear. Services like Dropbox and Evernote are perfect examples of this.

I have come to the realization that most people who want something for free will never, ever think of paying you, no matter how valuable they find your service.

(…)

Free customers are higher maintenance than paying customers.

Great discussions and points of view in the comments.