Interesting thoughts on price sensitivity and scaling of online properties:
Assume for example that a service serves photos (like Flickr), and that the hosting, bandwidth and distribution costs, fully loaded, are c $0.10 per month ($1.20 per year) per person. For 100 users, thats $120. Assume also that c 5% of these 100 users pay Freemium prices, so 5 people have to pick up $100 or $24 pa each (Flickr charges $25 for its Pro account)
But now imagine a video sharing site – files are c.10 – 100x bigger, so suddenly a 5% take-up is a $240 to $2,400 cost per person. Or imagine that one can only get a 2.5% take-up, that’s $50 per person.