He categorized products into 3 simple categories.
- Those that value fade over time like a meal. When you are hungry, it is worth more to you. After you consume it, not so much.
- Some products' value stay constant over time. The example he gave was newspapers subscription that shows up at your front door daily
- Products with value that grows over time. These are things that you don't see much value at the beginning but as you keep using it, they become more and more valuable to you. (e.g. services like Evernote & Dropbox)
He realized that Read It Later was charging up-front like a meal but its actual value increases over time. By using the freemium model, they can also madeit easier for new users to give Pocket a try without committing anything up-front.
Lesson learned here is to determine the type of value your product delivers over time then choose the matching pricing model.