The End of FreeConomics 2.0?

Fred Wilson today:

There's a movement afoot by investors to back web services with a real business model instead of the pervasive "give it away for free and hope for the best" approach that's been in favor for the past four years. Don't count me in that camp, but the movement is happening with or without me.

Fred also points to useful comments by Roger Ehrenberg about his investment criteria, but with the same quibbles I have:

I have added a few criteria to my check-list:

- Initially sells to the enterprise for branding, credibility, awareness and early revenues
- Can get to revenues within 6 months, tops
- Is sold on the basis of ROI, e.g., helps generate revenues or reduce headcount/costs

Revenues in 6 months? In 15+ years experience, we've yet to see any form of Enterprise sale apart from stationary level stuff with less than a 6 (more usually 9) month gestation period. The only way to do this is to have a consulting or similar arm attached to generate early cashflow. Reminds me of the "path 2 profitability" edicts that VC's rolled onto their dotcoms in 2001, after 3 years of "spend for eyeballs".

Fred makes a point I would subscribe to, for consumer stuff:

It's much better, in my opinion, to go with the freemium model, give a version of the service away for free to all comers, get a lot of users, get good market feedback, then develop a premium version of the product/service for sale to enterprise customers.

Though I wonder how many will be prepared to wait for that premium model these days? I suspect it will become required early up.

Anyway, as you may know, we have been sceptical about Freeconomics for awhile - so when people like Fred start saying this, can one assume that the FreeConomic high-water mark has passed for now?