Robert Donnell is in the heating and cooling business, not the technology business, so it comes as no surprise that his views on Web 2.0 technologies are hot and cold.
Mr. Donnell, president of a company called Hydronika based in Shelbyville, Ky., sells chillers, boilers and other commercial-grade heating systems.
About a year ago, he developed a training course that he wanted to offer online. Mr. Donnell turned to Nuvvo, a Courtice, Ont.-based firm that allows its users to set up a website to enroll in online classes.
Nuvvo's product is a good example of what the IT industry calls Web 2.0: A simple Web-based application that allows people to collaborate and share information more dynamically.
So far, however, Hydronika hasn't seen a big uptake in its course on energy-efficiency ratings for chillers.
"I probably get two [people] a quarter or something like that," he says. "It's for sales representatives that we might sign up, but most of the people have been random."
Like a lot of Web 2.0 companies, Nuvvo offers a free version of its service, which allows up to 10 pupils per course and 25 megabytes worth of online storage space. This is the option Mr. Donnell used. There are other versions that offer more but cost anywhere from $20 to $150 a month. Mr. Donnell said he "hasn't bothered" to investigate those yet. This could be one of the reasons Nuvvo, after only a short time on the e-learning market, put itself up for sale a few months ago.
A venture capitalist named Fred Wilson uses the word "freemium" to describe the business model on which many Web 2.0 companies operate. This is how he described it on his blog: "Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium-priced value-added services or an enhanced version of your service to your customer base."
Several Web 2.0 companies have managed the first part quite successfully.
They have started up online accounting, invoicing or database programs that cost nothing and are remarkably easy to use. They have managed to find customers in the thousands, but have yet to successfully figure out a way to get them to pay up. Several industries have toyed with the concept of a "loss leader," where they offer a commodity product below cost (or for nothing) in order to attract clients.
The word freemium implies that Web 2.0 companies have another trick up their sleeves that will be worth making the transition, but many users have been content to treat their products as one big, endless test drive.
"There's been a definite challenge, especially with consumer services on the Internet, to get users to transition from free to paid," said Thomas Purves, a technology consultant based in Toronto who is developing his own Web 2.0 venture. "There has been an attitude where consumers expect everything on the Web to be free."
Part of the problem, Mr. Purves points out, is that it is becoming easier and cheaper to build Web applications. This has helped spawn a lot of Web 2.0 but could also be its downfall. "If you don't offer it for free, another imitator might come along and offer it for free," he says. "There's a lot of competition to reach the bottom of this market."
The good news is that freemium services could introduce a lot of companies to technologies they might never have purchased five years ago. They are also being used by people who aren't necessarily in a traditional IT role, because they were developed with the needs of line-of-business personnel -- the managers, the admin staff and even the CEO -- in mind.
"In some ways, the approval cycle has gotten a lot easier," Mr. Purves says.
