David Watanabe came up with a great idea to make money on the new free version of NewsFire: include three paid-for feeds that the user cannot unsubscribe from. Site owners can bid for a spot as one of these feeds, bringing Watanabe revenue while offering a great product for free.
Recently there was an uproar when David added affiliate links to Inquisitor, his Safari search plugin. It was actually a good move, since it allows him to distribute his software for free, while still making money from it. Everyone wins – we all get a good product and David gets paid for his effort. Most people don’t pay for shareware, so this sponsored model is a good alternative for many developers. I’m sure many people would rather use ad-supported software with full functionality instead of limited demo versions.
It’s nothing new. Eudora used his same model many years ago. You could use it in one of three modes: a sponsored mode with full functionality although it displayed ads; a lite version that didn’t show ads but eliminated functionality; and a paid version that had full functionality with no ads. Twitterrific is doing the same thing now. It’s fully functional but displays unobtrusive ads, although you can pay to eliminate those ads.