You Can’t Make Money Charging $1 Per Month • Hacker News Board

Re: You Can’t Make Money Charging $1 Per Month

#51

Post by brk » Tue, Jun 28, 2011, 1:46 AM UTC

idlewords wrote: post #46

patio11 wrote: post #2

It is exceptionally difficult to run SaaS businesses with low price points, principally because you'll often be cash flow negative with regards to marketing spend. e.g. even if the LTV of a customer is a few hundred dollars, to scale the business, you may well be paying $200+ in customer acquisition costs. (Check the price for AdWords clicks on e.g. project management or invoicing sometime. Oofdah.) If you quickly re…

I strongly disagree that you need to pay anything to snag customers for an online service. Build a really good initial version, work your heart out to support it, and let word of mouth do the rest. It will be frustratingly slow to begin with but it ensures you are always in the black.

Can you provide some real world examples where this has worked? I'm not saying it's not possible, but I haven't ever witnessed/heard of it working just like that in any scenario I can recall.

Viral word of mouth is nice, but it usually takes years to get there.

Re: You Can’t Make Money Charging $1 Per Month

#52

Post by jacques_chester » Tue, Jun 28, 2011, 1:51 AM UTC

brk wrote: post #51

idlewords wrote: post #46

Earlier quoted context omitted.

I strongly disagree that you need to pay anything to snag customers for an online service. Build a really good initial version, work your heart out to support it, and let word of mouth do the rest. It will be frustratingly slow to begin with but it ensures you are always in the black.

Can you provide some real world examples where this has worked? I'm not saying it's not possible, but I haven't ever witnessed/heard of it working just like that in any scenario I can recall. Viral word of mouth is nice, but it usually takes years to get there.

Google, in its early days as a search engine? Slashdot brought it to the nerds and they brought it to everyone else.

Re: You Can’t Make Money Charging $1 Per Month

#53

Post by wisty » Tue, Jun 28, 2011, 4:01 AM UTC

patio11 wrote: post #2

It is exceptionally difficult to run SaaS businesses with low price points, principally because you'll often be cash flow negative with regards to marketing spend. e.g. even if the LTV of a customer is a few hundred dollars, to scale the business, you may well be paying $200+ in customer acquisition costs. (Check the price for AdWords clicks on e.g. project management or invoicing sometime. Oofdah.) If you quickly re…

Yeah, teachers are stingy, compared to most other B2B. A project manager will spend thousands of dollars on something that most of their team won't even use, it's just company money. Teachers typically have to beg for photocopy use.

However, college students, gamers, and programmers (i.e. HN readers) are some of the stingiest people on the planet. Github charges $7/month for repo hosting, and still gets customers. There's a lot more teachers than programmers, and they won't feel like n00bs for paying for something they could roll themselves, so they will pay more than $7 for a basic service.

Re: You Can’t Make Money Charging $1 Per Month

#54

Post by idlewords » Tue, Jun 28, 2011, 5:24 AM UTC

brk wrote: post #51

idlewords wrote: post #46

Earlier quoted context omitted.

I strongly disagree that you need to pay anything to snag customers for an online service. Build a really good initial version, work your heart out to support it, and let word of mouth do the rest. It will be frustratingly slow to begin with but it ensures you are always in the black.

Can you provide some real world examples where this has worked? I'm not saying it's not possible, but I haven't ever witnessed/heard of it working just like that in any scenario I can recall. Viral word of mouth is nice, but it usually takes years to get there.

It's worked very well for both websites I run (Pinboard and the Bedbug Registry). And it does take years, which means it's not "viral", just plain.

Re: You Can’t Make Money Charging $1 Per Month

#55

Post by WA » Tue, Jun 28, 2011, 7:03 AM UTC

albedoa wrote: post #9

WA wrote: post #4

Obviously, the main argument against a $1 per month is the fact that you need to provide a lot of support. From my experience, this depends heavily on the target audience I guess, but I completely disagree. I ran a website for a couple of years without thinking about turning it into a business. Finally, shortly before I graduated, I decided that I need to make money from it, otherwise I can't sustain it any more. Ove…

This is great information. Do you care to talk about your subscription and renewal processes and how much you think they factored in to your conversion rate? Aside from the pricing model you chose, I wonder how important the level of convenience was to your users.

As soon as an account expires, the core functions cannot be used any more and it displays a message asking to prolong the account. People pay via credit card or with their paypal account (I use PayPal as the payment processor). This gets processed immediately and within a couple of minutes, the account is valid for another 6 or 12 months.

The other option is wire transfer (which is very common in many European countries unlike in the US). The advantage here is that nobody needs to share any personal information. I just receive the money on a bank account. So far, there was no need to process that money automatically. I just wrote a little script, which greps for the transaction ID and the amount of money and prolongs an account accordingly.

I do not have an automated recurring payment system. All payments are "one shot", like a prepaid service. I can imagine that this is something people really appreciate. They feel more in control of their money and manually entering the payment information once every 6 or 12 months isn't too much of a hazzle.

Furthermore, I ask for as few personal information as possible. I don't store credit card information on my site. Heck, I don't even store real names in my database (but they are shown in PayPal).

Re: You Can’t Make Money Charging $1 Per Month

#56

Post by WA » Tue, Jun 28, 2011, 7:09 AM UTC

wtracy wrote: post #42

WA wrote: post #4

Obviously, the main argument against a $1 per month is the fact that you need to provide a lot of support. From my experience, this depends heavily on the target audience I guess, but I completely disagree. I ran a website for a couple of years without thinking about turning it into a business. Finally, shortly before I graduated, I decided that I need to make money from it, otherwise I can't sustain it any more. Ove…

I would point out that elementary school teachers are not likely to be very tech-savvy, and would probably be toward the high-end of amount of support required. YMMV.

Since you posted this as a reply to my post: My customers aren't elementary school teachers. You probably meant patio's post. I'm not sure whether you would call most women tech-savvy, but my customers are mainly women and they hardly require any technical support.

Re: You Can’t Make Money Charging $1 Per Month

#57

Post by kristiandupont » Tue, Jun 28, 2011, 7:13 AM UTC

idlewords wrote: post #46

patio11 wrote: post #2

It is exceptionally difficult to run SaaS businesses with low price points, principally because you'll often be cash flow negative with regards to marketing spend. e.g. even if the LTV of a customer is a few hundred dollars, to scale the business, you may well be paying $200+ in customer acquisition costs. (Check the price for AdWords clicks on e.g. project management or invoicing sometime. Oofdah.) If you quickly re…

I strongly disagree that you need to pay anything to snag customers for an online service. Build a really good initial version, work your heart out to support it, and let word of mouth do the rest. It will be frustratingly slow to begin with but it ensures you are always in the black.

It only keeps you in the black if you are not taking out a salary.

Re: You Can’t Make Money Charging $1 Per Month

#58

Post by WA » Tue, Jun 28, 2011, 7:13 AM UTC

MicahWedemeyer wrote: post #38

kelnos wrote: post #34

Earlier quoted context omitted.

Have you considered that your login UI (including the "forgot password" feature) isn't intuitive enough for your audience? We take a lot of things for granted as programmers/techies. Beyond that, I think I'd start "firing" customers who are a huge support drain like that, especially those who are non-paying customers. Unless your site depends heavily on network effects, and a large percentage of visitors have passwor…

Easy to say, tough to do. I feel personally beholden to all our users, and I want to make sure they can use the site effectively. To that end, I try to help as best I can. It's a drain, but I feel guilty just ignoring someone who is begging for help.

I know exactly the feeling you describe. But I think some posters here are right and there might be a little issue with your design. Maybe you simply lack a little snippet of information somewhere like "Cookies need to be enabled" or something like that. Or they simply don't recognize easily whether they are logged in or not.

Maybe it helps if you ask some people to perform a specific task while you're watching them (for example your friends). You can learn a lot from that about your design.

Re: You Can’t Make Money Charging $1 Per Month

#59

Post by ahoyhere » Tue, Jun 28, 2011, 9:55 AM UTC

idlewords wrote: post #54

brk wrote: post #51

Earlier quoted context omitted.

Can you provide some real world examples where this has worked? I'm not saying it's not possible, but I haven't ever witnessed/heard of it working just like that in any scenario I can recall. Viral word of mouth is nice, but it usually takes years to get there.

It's worked very well for both websites I run (Pinboard and the Bedbug Registry). And it does take years, which means it's not "viral", just plain.

Let's not gloss over your success with soft (useless) phrases like "hard work" and "passion."

You launched Pinboard to a crowd which already knew & loved you, at a time when everybody thought Delicious was about to fall over and die. Furthermore, you had novel marketing features - the "the price increases per user" thing, which was clever enough that people checked Pinboard out JUST to see it in action.

That is marketing -- and if you subtracted how much those early customers paid from the amount newer customers pay, that is your advertising cost. A discount is still a marketing expense.

And as for the Bedbug Registry, it's not a product - it's free. Furthermore, you serve desperate and angry and frightened users. They are much more likely to seek you out by Google than any other kind of customer. There is no equivalent level of desperate users for most software.

Re: You Can’t Make Money Charging $1 Per Month

#60

Post by ahoyhere » Tue, Jun 28, 2011, 10:00 AM UTC

WA wrote: post #4

Obviously, the main argument against a $1 per month is the fact that you need to provide a lot of support. From my experience, this depends heavily on the target audience I guess, but I completely disagree. I ran a website for a couple of years without thinking about turning it into a business. Finally, shortly before I graduated, I decided that I need to make money from it, otherwise I can't sustain it any more. Ove…

You made the first move - good job.

Now, it's time to consider the extremely likely possibiliy that you could charge 5x the amount and without decreasing conversion by 5x. Which means you could probably be earning 5x than you are now (or more) without any extra work.