Ask HN: What's up with all these services charging $10/$15 a month?

https://news.ycombinator.com/item?id=1639028

by StavrosK • 16 years ago

52 120 16 years ago

news.ycombinator.com

More and more frequently, I notice that online services charge $10/$15 a month. For example. I just saw a service that tracks your laptop/phone, and they want $15/mo to track more than three devices.

B2B services are more excusable, but still, the fees are pretty high. It seems to me that you need to spend $150 a month to subscribe to the 10 services you might find useful. $2/$3 a month sounds much better to me, especially for services for which users aren't very expensive.

What are your experiences with this (from either standpoint)? How much do you pay a month for various online services?

maxdemarzi• 16 years ago

Phase 1: Collect Underpants

Phase 2: Instead of complaining create a "service bundle" of services you would use together that add up to $150, contact the service owners and ask them to get into a bundle agreement for $50 bucks total, you take $5 on each sale.

Phase 3: Profit

placer14• 16 years ago

Similar to what http://www.appsumo.com is doing. :)

noodle• 16 years ago

I admit I was hoping for some sort of clever tie-in to http://manpacks.com

paraschopra• 16 years ago

Sorry, idea taken already :)

http://www.appsumo.com does that. And my tool is part of that bundle :)

wwortiz2• 16 years ago

Isn't appsumo a temporary deal? At least I took it that way, kind of like those cable deals where it is 30 dollars a month for 6 months so long as you sign for 2 years except with this you don't sign a contract you just can't use them for less than full price anymore (unless I missed that).

pchristensen2• 16 years ago

And I salute you for including it in the bundle!

rarestblog2• 16 years ago

You could easily pay 2$ per transaction + % of the revenue to credit card processor. So, 2$ price tag = 0$ profit, or even loss.

Also it's probably about 8 times simpler to get one $15/month subscriber than eight $2/month subscribers.

It's the market. If it was feasible to sell those services for $2/month - there would be competitors taking advantage of that fact. Since there's (I assume) none - that means it's not economically reasonable to sell something at that price.

petercooper2• 16 years ago

If it was feasible to sell those services for $2/month - there would be competitors taking advantage of that fact.

I think Apple has proven that with the App Store. You couldn't buy many professionally developed for a few bucks 5 years ago, even those that took as much development time as the top titles on the iPhone now. Apple has made the billing and distribution side so simple that development time and expenses are almost the only variable.

rarestblog2• 16 years ago

Yes, but that actually proves the point. I don't mean that it actually costs banks $2 to handle a transaction. It's what they charge small businesses for a transaction. If you're Apple and can negotiate a 5cent (or whatever) fee per transaction and able to sell apps to millions of customers - then $2 apps would be profitable. For all other approx. 99.999% of companies out there - $2 per app or month is just not feasible.

Travis• 16 years ago

From what I've seen, cc fees are usually about .40c + up to 3% a transaction. A big cut (25%) of a $2 charge, but far different than suggesting it's 100+% of revenue.

patio112• 16 years ago

$15 is ridiculously cheap. Don't even get me started for businesses: $15 pays for a third of the cab fare for your consultant to get from the airport to your office. For a revenue generating app it is a no brainer.

$150 is not much for a person to be spending on ten identifiable line items, either. Maybe if you only know poor college studentsr that sounds like a lot of money. For a middle class family, that sounds like a cable bill. If your service is in the top five most important things for mom in her life, price in two digits is irrelevant. She spends more on shampoo, hair care, feminine hygiene, paper, magazines, romance novels, etc, etc.

cperciva10• 16 years ago

$15 is ridiculously cheap

For something you want, maybe. But a lot of these services fall into the category of "I might find it useful sometimes but I'm not sure" and most people aren't going to spend $15/month on something they're not sure they want.

The average Tarsnap revenue per user is about $3/month, and a large majority are less than that (yay lognormal distributions!) but I still work to convince people that it's worth spending that money.

tptacek23• 16 years ago

Respectfully, Colin, but you price Tarsnap horribly. You run it like a public utility (a very complicated public utility) instead of a business.

You think this is a good thing, but it's not. Instead of setting a simple price based on what Tarsnap is worth to people --- a task that requires figuring out what Tarsnap is worth to different people and selecting the segment of the market that(a) you want to serve and (b) is sufficiently lucrative --- you have a fundamentally cost-based micro-metering structure that almost certainly radically undercharges most of your users.

You may think you're doing your users a favor by letting them off easy. But you're not. If Tarsnap is worth $11/mo to most of your users (hint: it is) and you charge $10/mo, you're generating value for them. But instead of doing that, you charge them almost nothing, and as a result are much more limited in what you can do for them. Last I checked, you were consulting instead of full-timing Tarsnap.

If you charged more, you could afford to:

* Radically overhaul your website and educate users about what secure backup actually means

* Commission a better user interface for people who you'd like to offer secure backup to but can't because they're not going to use a Unix command-line tool

* Implement more and better features on the backend of your system for tracking data, scheduling backups, backing up different kinds of data, and whatnot

This is all apart from the obvious point that your micro-metered pricing scheme is a Mensa test that almost makes fun of people's attempts to figure out what your service costs. Yes, the fact that it costs much too little means the joke is on you, but that doesn't really take the sting out of it for your prospective customers.

patio112• 16 years ago

Where do you live? I want to get a coffee some time, talk Putnams, and tell you why pricing in pico dollars attracts pathological customers who are the worst possible people to sell online backup to, and why instead you should be selling to people who happily pay a hundred times what you are currently charging.

Not specific to cperciva: If you have customers who value your service less than a cup of coffee, fire them. If this leaves you with no customers, consider a new app or marketing strategy.

fluidcruft4• 16 years ago

Sorry to be alarmist/morbid, but what happens to tarsnap if you suddenly disappear/die?

tptacek23• 16 years ago

I see both sides of this.

On the one hand: I have subscription fatigue. I've reached a point at which I'm hestitating to use services because the number of current $10-$20 subscriptions I have no longer fits in L1 cache and it often isn't worth it to me to evict cache lines to figure out what I'm spending --- and so I bounce.

On the other hand, next to the cost of having employees, my rational brain knows I can't possibly be spending real dollars on these things. Put in perspective: every Matasano employee has an Amazon account for which they can buy any book they want ever --- we even have a rule that says "don't worry if someone else bought the book, if you want the book it's yours and you keep it and you can share if you want to but don't worry about it" so that people won't waste time coordinating books instead of just getting what they want and getting back to work. This policy, which we concluded won't cost us "real" money ever, is much more expensive than all my $10-$20 subs ever will be.

But the subscriptions "feel" more expensive.

The answer to the original poster's question is: these things cost $10-$20 because the people running the service feel like they will generate approx. $10-$20 worth of value, and those are the terms under which being in business to generate that kind of value makes sense. In many cases, if the service actually turns out to be worth $3/user, they'll shutter it and pick something better to work on.

jacquesm10• 16 years ago

Your amazon policy is quite amazing. I figure that goes only for 'job related' books? Or any book at all?

SkyMarshal2• 16 years ago

Your Amazon policy is almost better than stock options and a 401k. I'd probably never willingly leave a company with that policy.

maukdaddy2• 16 years ago

I was going to make my own reply, but as usual patio has succinctly made the point. So I'll give some examples of what $15 really means.

- I spent $18 a month on Netflix without a second thought.

- $15 is one less meal per month at Chipotle (for 2 people). I'd gladly give that up for a decent service

- Average cable bill in the US is probably $80+. Give that up and you not only waste less time, but can afford at least 6 of these services.

- Once you're out of college, you will GLADLY give up $15/month to save time. Time with family is precious and anytime I can spend a small amount of money to gain more time I consider it a win-win.

- Most middle class families probably spend more than $15/week at Starbucks alone.

- From a business standpoint, $2/user/month is simply not sustainable.

tptacek23• 16 years ago

Parking in Chicago next to my office costs $25/day. (The train costs $5/day for me, but I'm unusually close to it).

dododo• 16 years ago

average cable bill in the US in 2008 was $71. http://www.multichannel.com/article/196364-Study_Average_Cab...

increases since then seems to be 5-7% per year.

good guess!

ja27• 16 years ago

I pay $25/year for Flickr Pro, which is almost exactly $2/user/month.

jacquesm10• 16 years ago

This is because the psychological upper limit at which people start to take notice of what appears on their credit card statements when they decide to decrease their monthly expenses seems to be around the $20 mark.

As long as you're below $20 plenty of people will continue a subscription until their card expires even if they don't use a service, above that the cancellations go up, so do the chargebacks and the retention goes down.

This has been researched ad nauseaum by the services you refer to, which is why they all converge on the same price range.

StavrosK11• 16 years ago

Hmm, this makes me think that I'm charging way too little for historious at $3/mo, but, then again, something tells me that if I charged $15 nobody would buy...

jacquesm10• 16 years ago

I'm going to write a little blog post, just for you (and for everybody else that earns money through subscriptions). If it works out you owe me a beer. Stay tuned, back in 45 minutes.

ydant• 16 years ago

As one anecdote, I wouldn't have paid for historious at more than the $20 a year I paid (I hesitated, and decided it was worth it due to the usefulness and the fact you seemed like a cool bunch). It's a cool service, but not THAT cool. I could always go back to forgetting URLs, or using Google Reader to remember them.

csomar• 16 years ago

It depends on the value you get. Some SaaS are free or cheap, they probably cost little to the company, or the company is running cheap (single founder in ramen).

Now for how much a single person spends, it's a different story. Let's assume your target audience is software developers. An average software developer should net more than $5,000 a month. Spending $150, is like 3% of his salary. Not a lot, so he could even subscribe to more services and more expensive services.

If your target audience is Egypt for example, where the developer net $200-$250/month, subscribing to only one service may cost 10% of his salary. So it's a luxury he can't afford.

Bottom of the line, your target audience and market readiness is the one that decide the price tag for your SaaS.

garrettdimon• 16 years ago

It's important to remember that "expensive" is relative. Depending on an individual's income or company's revenue, $10/$15 can be huge difference or just a drop in the bucket. When a business is billing out consultants at $150/hr, spending even $100/mo on something that makes employees more productive or efficient is generally a good decision.

It's important to not only look at the cost of the product but also the benefits that it provides. Do the benefits outweigh the costs to the degree that you're comfortable spending the money?

To put it another way, it's more useful to think about the value of the tool relative to the price. It's less about whether a given dollar amount is "expensive", and more about whether the value exceeds the cost.

For example, all told, we gladly pay upwards of $200/mo for hosted services that are not necessary to run our business. However, the value that we receive from that money far exceeds the dollar amount that we spend on them. So in this case, even though $200 isn't insignificant, the dollar amount alone isn't relevant. We consider the services "inexpensive" because the value relative to the price is amazing for us.

brosephius• 16 years ago

if you think it's too expensive relative to its operating costs, launch a cheaper competitor :)

krschultz2• 16 years ago

It's easier to start high and lower than start low and raise

erikpukinskis• 16 years ago

Not if you grandfather.

cullenking3• 16 years ago

Grandfathering also has the benefit of making people very happy with your service, and reluctant to ever cancel their account. I keep my usenet provider account because I am afraid of losing my 25% discount I received when I signed up two years ago, even though I don't necessarily use the account to it's "full potential".

Mistone• 16 years ago

here is our pricing page for a Web CMS service targeted to designers. one of my big concerns is that people correlate a hosted CMS offering to the cost of standard hosting so our prices seem high, any feedback on your first impressions of value/price would be appreciated. http://www.webvanta.com/pricing

saturdayplace• 16 years ago

This discussion reminds me of Joel's fantastic Camels and Rubber Duckies article (http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...). It's long and won't lead you to any conclusions, but it's entertaining and very educational.

jsz0• 16 years ago

Really depends on the service. If you think of a laptop/phone tracking service as a productivity/accountability tool for businesses to keep an eye on their workers it only has to save 2 hours of productivity in a month to pay for itself even if you're deploying it for minimum wage workers. (unlikely) If the service is too inexpensive they have more users to support and many of them may decide that even $2-$3/month is too expensive if they don't have any good reason to be using the service in the first place. If they keep the price high they attract fewer but higher quality customers that are cheaper to support. I'm guessing many of these services do offer good volume discounts.

mkramlich2• 16 years ago

I don't think your basis for deciding those prices are too high is a rational one. It basically amounts to, "I think those are too high because... I think they are too high!"

There was often someone slaving away long hours to create and make that service available to you, all of which cost big bucks or at the very least, the opportunity cost of their time is big bucks. $15 is nothing in the grand scheme of things. You are always free to create the service yourself and/or scratch that itch another way.

maguay• 16 years ago

When you're aiming at consumers, I think <$5/month or <$50/yr is definitely a better price point. I think Flickr Pro's ~$25/yr pricing is much more in line with something most consumers would go for. And that's even at the semi-pro level. But, when you're aiming your app/service at professionals, freelancers, or small/medium business, then slightly higher prices might fly. Still, though, there are so many "must have" apps now, that the subscription fatigue should start hitting people bad.

What I'd really like to see is more webapp service synergy. Most of us would be much more likely to pay $10-$15/month for Dropbox + Evernote Pro + Backpackit.com Personal (substitute your favorite webapps in here) than they would to pay ~$5/month/service. Something about the bundling would make people feel like they're getting more for the price, even if the absolute price is the same.

At least that's my $.02...

ahoyhere• 16 years ago

It's foolish to assume your price sensitivity is the same as your customers'.

Please, stop speculating and read a book or two on pricing. I personally recommend Pricing With Confidence. They know more about it than you do.

gdltec• 16 years ago

$15 dollars for a "useful" service is nothing. The average person spends that "everyday" for lunch. The companies offering these services have to charge enough to pay for the servers, developers, tech support, etc.. and yes, also to make a profit, it is a business after all ;)

jaxtapose• 16 years ago

> $2/$3 a month sounds much better to me, especially for services for which users aren't very expensive.

How do you know if they are expensive or not?

CaanaCast• 16 years ago

Before I read your post and from reading the title I thought you would say why is it so cheap.

Ask HN: What's up with all these services charging $10/$15 a month?

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