Free in education is a big deal. Don't bother mentioning paid apps in front of teachers because you'll lose the group. Last year, we saw Geddit close it's doors. This year, there are two notables closing shop before the fall: Curriculet and Snagit for Chrome. The two are in slightly different boats but they're closing for similar reasons.
Curriculet was a text annotation tool built for schools. You could rent (much like a library) an ebook and then add annotations on top in a user community. The idea was that teachers would be able to assign a novel and have students socially annotate their learning. It was a really great idea and implemented rather well. They were never free, which is unique for an edtech startup. They recognized the cost up front and tried to cover their bases with subscriptions.
Unfortunately, they were up against the publishing world. Plus, if a school already has hard copy books, why invest in a digital copy? I think social annotation is on the cusp of becoming something larger (see the work being done by Hypothes.is) and that Curriculet may have been in front of the curve too much. I think this idea will have more legs, either from a standalone company like Curriculet or through traditional publishers (maybe), in the future.
Snagit for Chrome was another beast. TechSmith, already popular with flipping, was trying to jump into the Google Apps for Education space. There are a ton of independent developers doing cool things and sharing their work through the Chrome browser. It's nice because Chrome levels the device playing field - teachers can use apps and extensions on traditional desktop or laptops through the browser and students can rely on a stripped-down Chromebook to access the same material.
Google Apps may be "the great leveller" (more on that in another post) but it's also siphoning the ability for software developers to run sustainable businesses. Everything in the Chrome store is free. There are some paid apps, but most have a free user version. The lowest common denominator soon dominates the system. When a company, like TechSmith, comes along and tries to run a traditional business model within a free-only economy, they need to evolve (which is unlikely given that it's a single product in a larger portfolio) or they have to jump ship.
In the meantime, teachers are caught in the middle. There is a large amount of trust for name-brands getting into the Chrome space. Many relied on Snagit because they trust TechSmith. Now, they're left to change their entire system. Again.
Welcome to the land of the Free.
I've written other posts on the idea of free software. Check them out if you want more stories of great companies being run out of business.