This reeks of a team floundering trying to figure out how to keep a ship from sinking.
1. Our "Free" product is now $6000/year ($500/mo)
2. OR give us a link-back
3. OR prepare for a lawyering
While the response is inflammatory and wonderful for up-vote fodder, I can't imagine any calm, decent person ever taking this tact with a client.
There are 17 different emails they could have sent to SupportBee that would have been more constructive than this.
I wonder if the Gigya team is too young to know better or if they have back-breaking pressure on them from their investors to turn any sort of profit before they are all taken out to sea and shot.
Obviously a stupid response, but really seems to be a response out of pure desperation more than anything.
1. $6000/year, OR
2. link-back, OR
3. If neither of these options are chosen within 3 months,
we will disable the service on our end.
The $6k/year price is a bit steep, but that's their prerogative. Similarly, they are well within their rights to disable the service after reasonable notice. They may even be within their rights to sue, but suing clients (or even threatening to) is not the way to Win Friends and Influence People.
Let's not assume that not knowing better requires youth. Because let's face it, there are plenty of older folk who are still this stupid, and plenty of younger people who realize that threatening to sue their clients for no good reason is a Bad Move.
This is such a facile meme, and now you've stretched it to a new level of absurdity. Lawyers doing pro bono work don't have clients? Somebody for whom you are doing work for trade isn't a client?
Nonsense. If someone is using your property (or widget) without your permission (or license), it is reasonable to consider them a thief (or pirate), and absurd to consider them a client (or customer).
That description is almost but not quite entirely unlike what actually happened. They were using the widget with permission, and suddenly they changed their minds and wanted to start charging for it, but without doing anything to enforce that.
It may or may not be unlike what happened depending on if, when and how the terms of service were revised.
For example if the TOS were revised two years ago, then it is possible that there was no longer permission to use it (it is also possible that permission continued).
"Obviously a stupid response, but really seems to be a response out of pure desperation more than anything."
Yes, that seems to be the simplest explanation. But from the original article this was the second communication as well. The first one, (which is linked), was pretty clear that the choices were 'give us a link or pay us money, your choice.' The author notes it had a useless subject line. And useless or not, if a vendor I'm using sends me an email I read it, and if it truly is useless I ask them to not send useless email.
So this was an escalation on the part of Gigya from "We've changed our pricing, we don't offer a free version any more so you have to choose a new option." To "You ignored our previous response, let's be perfectly clear about what your choices are."
Now you can argue that the sequence might be: nice, nice, threat. But if the company is looking at a shrinking runway they might cut out the middle 'nice' version of the communication.
And the author comments "This almost makes it a paid link that can help them rank up for ‘Social Media for Business’" No, this is exactly a paid link for helping Gigya rank higher on Google. Clearly they feel like the paid link is 'equivalent value' to the $6,000 which they want to charge.
The only economic question here is what economic value does SupportBee put on a paidlink on their site? If it were less than $6,000 then they win by giving the link to Gigya, if its more then they should just pay the $6,000/yr. (or use a different service).
I can't find a lot of fault on Gigya's part here. That it caught SupportBee by surprise seems to be because the author didn't read their mail.
> So this was an escalation on the part of Gigya from "We've
> changed our pricing, we don't offer a free version any more
> so you have to choose a new option." To "You ignored our
> previous response, let's be perfectly clear about what your
> choices are."
Exactly right.
> I can't find a lot of fault on Gigya's part here. That it
> caught SupportBee by surprise seems to be because the
> author didn't read their mail.
Again, no argument from me (or I think anyone else?) -- the hub-bub is just over the tact Gigya took.
As you pointed out above and I mentioned in my comment, there are innumerable better ways to state what they were trying to get across and they chose one of the poorer ones.
So no problem with what they did, just how they did it.
I also can't help but wonder why they didn't just disable the widget for that client after the 1st or 2nd notice, let the client come to them and then start a peaceful up-sell discussion where a well-informed decision could be made (exactly the way you stated w.r.t. to the worth of the widget/vs first-page linking for SupportBee).
Net-net, nothing to see here, just some people being more rude than expected.
Why so rude? My guess is financial pressure is causing them to act more aggressively to secure income; as you put it, a shrinking runway.
The only economic question here is what economic value does SupportBee put on a paidlink on their site? If it were less than $6,000 then they win by giving the link to Gigya, if its more then they should just pay the $6,000/yr. (or use a different service).
I think this is almost the right question. The real one would compare the cost of having a paid link on their homepage, the cost of the service ($6000) and the value of the service. If the service isn't worth the cost of the paid link or of outright purchase, then dropping the service is the right decision.
I seemed to have missed the part about why Gigya did not just suspend the non-compliant users' service, or indicate they would do so in a communication.
Threatening legal action to the very people you worked so hard to get to use your free platform is just asking for problems.
Most of the Gigya apologists I've read seem to say something along the lines of, well the chips were down and they were shooting from the hip. As every true gunslinger knew, this was the fastest way to get killed.
This is an easy problem - change your API. It creates a built-in way of excluding previous users and, if a bit forcefully, opens lines of communication for users to update their implementations.
Legal threats? Good riddance to you. I'd not touch your service if it sent me free money.
I act with the belief that notice by email is not enforceable and I ignore any emails with claims of legal action. I am under no obligation to read email. If it were true that an email serves as legal notice, then process servers would be out of work.
In general, it would depend on the type of notice. The bar is high for process servers because of the extraordinary importance of the news they're delivering. However, many contracts and statutes merely require "written notice." In these situations, the distinction between snail mail and email can matter, but I don't think it would often hinge on one's ability to ignore it. One can just as easily ignore snail mail as email.
But how would companies with lots of users provide notice otherwise? Apple is not going to be sending out letters to all XYZ million users of iTunes when they change the Terms of Service.
Is there something I'm missing? They discontinued a service. They're not asking for back compensation from when it was discontinued, only from this point on. So "please stop using our service or start paying" seems like a reasonable request.
I typically expect an "its their buisness, their prerogative" type of response here on HN, how is this situation any different?
Because the notice came by email? I'm sure if the first suportbee heard from them was a cease-and-deist letter in certified mail everyone would (rightfully so) point out that it could have much more easily been solved with a few email explaining the change.
Because the notice didn't come by enough (or good enough) email? I'll give you that it might be worded a bit strong for a second notice, but this is buisness, not a cuddle factory. Is it really worth getting your panties in this big of a bunch?
It is their business and prerogative to charge for access to the widget.
Instead of saying "please stop using our service or start paying" (or face legal consequences), they should have said "please start paying or your widget won't work any more".
That they use legal threats instead of an on/off switch to block access says something about their competence.
Do they really think this is a good tactic? It immediately creates tension between them and the client. Even if you paid up or added their link to your page would you trust them in the future? Absolutely not.
I personally can't wait until the freemium model finally dies. It is extraordinarily difficult to pull off despite how popular it is and creates desperate decisions like this.
I run a freemium business and it's very lucrative. I'm 99% sure that no one would sign up for the paid model straight up.
Everything we offer is offered somewhere else for free, but we just package it all together in a much easier format. That's a tough sell out of the gate but once people get a taste of it, they understand why it's worth it to pay.
There might be a few, but I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one.
I'm not saying freemium will never work, but let's face it: it's ubiquity is because it was at one time the flavor of the month startup model that VC money was pouring into, not because it is a superior or effective business model.
> I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one.
So the freemium model is like any other small business?
"There might be a few startups that work, but I'd be willing to speculate that there are many more examples where they did not work and the company either went under or had to perform a complete reversal."
There are two things to consider when thinking about freemium.
1. Can you monetize free users with your product? In many cases you can, using ads, affiliate links, search partnership, ...
2. Is it cheap for you to support free users? This have to be compared to conversion rate. If it is really cheap to support free users than you can have bad conversion rate.
In some specific cases the freemium model is the only model that works: products where interaction with other users is required for product to be usable. Only example I can think of right now are online games. You need players in order to attract more players, some of which may convert to be paying customers.
Just in my industry:
AVG, AVAST, AVIRA, BitDefender, MalwareBytes, SUPERAntiSpyware
All offer a non-trial/non-expiring 100% free home user version of their security software, with a more feature rich premium option available for payment.
Freemium works like gangbusters in some industries.
It would be interesting to see some numbers though. I wonder what percentage of free users upgrade to a paid version. I wonder what it costs to support the free users. I have to assume it works for them, or they probably wouldn't have lasted as a company. But, speaking anecdotally, I've used several of these products and have never felt the need to upgrade.
Also, you could make a case that these are not truly freemium, since any commercial use requires payment.
About 1% is a good estimate. At first glance you might think this is bad, but actually -- the freemium model provides boatloads of word of mouth. Even if only 1% buy - a large % of the other 99% are still satisfied and tell people, which throws more folks in the funnel and leaves the company with a large surplus of goodwill.
We have people routinely write in to us - 'Ive used your product for years and it's worked so great I just want to help contribute' and so they buy a license - just out of gratitude from years of free service and not because they are looking for any of the Premium features.
Regarding the 'cost of free users' - the cost is negligible. It's not like we write different definitions for the premium and the free - they all share the same definitions so there is not duplication of effort. Also, usually security software also acts as a 'data collector' in that it sends back suspicious files back to the lab for analysis. In this respect, having hundreds of thousands or millions of free users makes it easier to write definitions and protect all of our users because they provide us with more samples than we would of otherwise had access too. We actually ship a better product BECAUSE we have such a large # of users (both free and paying users).
Good point. I can see how a big user base would help you develop a better product in this industry.
Regarding 'cost of free users', I was thinking of support costs. Even though a user does not pay for the product, they still expect to get help when they run into trouble. And if they don't get help, that could wash away some of the goodwill they might otherwise feel.
You can get around some of the bandwidth costs by doing what AVG and others do, which is bounce 100% of downloads to download sites like CNET so that the downloads count towards bumping you up in their 'top downloads' lists -- which helps you get even more downloads moving forward.
Some companies do not offer phone support (especially not to Free users), so this limits free users support down to just tickets and forums (which can be user-moderated to a large degree). Some companies have had success bouncing free users who need support to 3rd party 'PC help' type companies who can work with the person over the phone - for a hefty fee of course, and part of that goes back to the originator as commission.
Flickr was profitable even before acquisition with a freemium model. The free version of Flickr is exactly like the paid version except with upload caps per month.
Dropbox has a freemium model and is probably profitable or on their way there.
One thing both have in common: they are basically giving away disk space. Storage costs are trivial -- we're approaching pennies per GB -- but giving away CPU time or bandwidth is a much riskier proposition.
Good examples, but I can't help feeling that there a lot of assumptions about profitability. Dropbox, for example, is a great service, I really like it. Every tech-savvy person I know uses it, but no one I know pays for it. I know this doesn't prove anything, but it makes me wonder if they are making money. Even if disk space is dirt cheap, it's still not free for them. I wonder how many paying users they need to cover the cost of all those free users.
* Continue to provide actual new content for players, for free.
* Start selling hats
* Stop charging for the game (nearly four years later).
I wouldn't necessarily mark up TF2 as a freemium success as it only went to the model fairly late in it's life (after it had already more than made back it's budget, likely).
Freemium is supposed to work because FREE is very powerful (read Predictably Irrational by Dan Ariely - chapter 3).
You can get many users to sign up for free and they can be great advertisers for you.
However, providing something for free can also trick you in deciding which features to build and whether people really want the thing you build. The difference between free and $1 is much bigger then $1 and $10. I believe that is where a lot fremium startups fail. They just assume 5% of free will convert. Nope: in many cases it is 0%.
So I never sign up for service which is free and there is no way to upgrade to some paid version. Even if they are in beta.
I have never seen a Terms of Service agreement that would make gigya's behavior seem reasonable or justifiable in this case.
Even if their ToS reserved the right to start charging for the service at any time, and explicitly wrote in crazy terms that disclaim them from notification periods, methods of notification, etc., their odds of collecting actual dollars by force are infinitesimal.
Sadly, their odds of collecting actual dollars by threat of force might be pretty good. How sticky is their solution?
Ok so hate to point out the obvious, but if you want people to pay for your service ($6000 a year no less) or backlink you.
You might need to put in a bit more effort than a single email with a crappy subject line and a follow up email threatening legal measures. Maybe something nice and friendly even?
Someone said maybe they are a young team..sounds like the kind of crap corporate dinosaurs would pull to me.
I do not understand so many tech companies' reluctance to pick up the phone. Often you can resolve whatever you need to resolve in 10-15 minutes, and you don't come off looking like a jerk during the process.
I don't understand what was so crappy about the subject line. If I was using any service, free or not, and I received an email with the company name and the word "Permissions" in the subject line, I would read it.
I don't think this is totally unreasonable. From their point of view, they offered a perfectly reasonable alternative to paying, which was ignored.
By ignoring (accidentally) the original email, the message sent back could be interpreted as: "We're not implementing your link back, and we're not paying for your service, but we're still going to use it anyway".
I'm playing devils advocate here, but there are two ways to look at this.
I don't think this is totally unreasonable. From their point of view, they offered a perfectly reasonable alternative to paying, which was ignored.
By ignoring (accidentally) the original email, the message sent back could be interpreted as: "We're not implementing your link back, and we're not paying for your service, but we're still going to use it anyway".
Wait, what? So - if I ignore an unsolicited email, that suddenly becomes actionable if I don't do what the email says? I have a hard time seeing how that is not totally unreasonable.
The only reasonable nuclear option for them that I see, would be to simply terminate the user account or service, if they did not respond.
Your argument hinges on the email being unsolicited.
One could argue that the email was not unsolicited, if the email address was obtained during signup and acceptance of the Terms of Service.
Since it is not uncommon for free online services to have Terms of Service which allow the provider to unilaterally change those terms, the argument that an email notifying the user of the change is unsolicited is further weakened.
While I am not suggesting that the alternatives offered are or are not fair or reasonable, the follow up email did its job in getting the service consumer's attention and more importantly action in regards to the matter.
OK - re-read my comment with the word 'unsolicited' removed.
It is still unreasonable to send out legal threats because you did not receive a response from an email. You don't know if the email was read, or if it was even delivered to the user's inbox (it could have been flagged as spam, for instance). Or, as it appears to be in this case, it could have a poorly worded and misleading subject, causing it to be ignored.
Furthermore, did you read the email that was actually ignored? It is linked in the article, and located here: https://gist.github.com/1833289
Note that it specifically says that "if you agree to this arrangement" to implement the link back. There is actually nothing in that email that would suggest that any action was required; the next step sans link back was simply for Gigya to then send a price quote.
While I am not suggesting that the alternatives offered are or are not fair or reasonable, the follow up email did its job in getting the service consumer's attention and more importantly action in regards to the matter.
Well, naturally. I was not arguing that being unreasonable was not effective in forcing action on someone's part. I would argue, however, that it is unethical and counterproductive.
>"It is still unreasonable to send out legal threats because you did not receive a response from an email."
Hardly unreasonable universally - particularly when it comes to non-payment.
And it is clear from the first email that the link back is an alternative to a license fee [from your link]:
Hello,
My name is Atara Herskovics, Senior Marketing Manager at
Gigya. We're pleased that Muziboo.com has been enjoying
Gigya's Wildfire share plugin for a while;
however please note that as part of Gigya's
business model, for the last couple of years
we have been charging a license fee for the use
of our social plugins. In recognition of the
fact that you were one of Gigya’s first clients,
we would like to provide you with an alternative
option in the form of a link to Gigya
that you would place on your homepage.
If you agree to this arrangement, please
implement the exact link below:
<a href="http://www.gigya.com/">Social Media for business<a/>
Alternatively, we can send you a price quote for your
continued usage of our Wildfire product.
Thank you,
xxxx yyyyyy
Senior Marketing Manager, Gigya
Email deliverability isn't a guaranteed thing though. Usually that's fine, but if the argument is we're going to charge you because you didn't take action, wouldn't you need to prove it was either sent or received? Maybe I'm just really old school, but I'd think registered mail or something would be required in that case.
IANAL, but when I served on a jury most (if not all) of the emails relating to the case were not admissible as evidence because there was no way to prove authenticity, delivery, etc.
>"wouldn't you need to prove it was either sent or received?"
[IANAL] Probably not (in the US). In the US, anyone can sue anyone else over anything. [Not that I doubt email notification might present problems in court - but who is going to court over $6000?]
It would seem to me that if the service was free, no money exchanged hands, therefore no contract exists that would make any sense in court. The only recourse they would have is to shut off access..... they'd have nothing to sue over.
The correct way to transition from a freemium to paid service is to grandfather previous users in, not classlessly pull the rug out from under them and demand money or a backlink (seriously? $20M in venture capital and you're begging users for backlinks?)
Moreover, that e-mail was just really ham-fisted. Why not say "your service will be discontinued if you don't respond" instead of going thermonuclear with legal threats? It reeks of desperation and disregard for their existing clients.
Grandfathering is as stupid an idea as freemium. Ever heard of inflation? It's a totally and utterly stupid idea and I'll have zero sympathy when any startup doing it suddenly find themselves in a world where the dollar isn't worth anywhere near what it was.
Prices change. I don't expect to buy a Mars Bar for 15p from my local corner shop as they sold it to me that price 20 years ago.
It is fine to say 'we're discontinuing your current plan, sorry'. Maybe be nice and offer them 3 months more free to transition if you can afford to. NEVER grandfather.
What you don't do though is threaten legal action because you changed your T&Cs, that's just stupid and regardless of you CYA 'subject to change' clause you're not going to win in court and you just made a bunch of pissed off ex-customers telling everyone you suck because you threatened them.
Have you ever looked at the account lifetimes of users who have been grandfathered into a cheap plan versus the lifetime of a regular user on a regular plan? It's quite a thing to see.
Grandfathered users will hold onto their subscription like it was made of gold. Even if they don't need the product anymore, you'll find them still hanging around for years because they know what a great deal they're getting. In mildly-innumerate-user-psychology, they're making money every month by keeping that old grandfathered plan.
So even though those guys are making you less money, they're going to continue making you that money pretty much forever. Way more over their lifetime than they would have had you forced them onto a more expensive plan, pissed off half of them into leaving immediately, then watched the rest trickle away through attrition.
Furthermore, a user with low churn is worth much more than a normal user. In the phone industry, telcos pay over $300/head for a new subscriber, who will leave after ~30 months. That means they have to allocate $10/month during your subscription to find your replacement.
It's worth giving an existing customer a $10/month discount by way of a grandfathered plan if it means they'll stay around.
No, the reasonable thing to do (and the good business practice) would have been to in some ways limit or revoke their access to the API if they didn't pay. That way, if they miss the mail and / or choose not to pay, they lose service but no more.
Keeping up the service but demanding money with force would make me incredibly wary to do business with them. It's destroying trust and goodwill, and pretty much guarantees that, were I in that position, I'd be looking for alternatives with whom I could have a more healthy business relationship.
Need to make money off what used to be free? Fine, but be polite about it. A business operates on the good will of its customers, who they've just annoyed.
Why couldn't they just shut the service off if these guys didn't pay? Going straight from "please pay or link" to "we will sue you" is unreasonable to an unbelievable degree.
The issue is not with them wanting to charge money or get links or whatever. The issue is that they escalated way too hard and way too fast when much kinder effective measures were available.
Threatening legal action was completely unnecessary and makes them look like an ass. Simply pointing out you will stop the service from working for non-paying users would have been enough.
I completely agree that it's not an unreasonable approach; though Gigya should have made the subject line of the initial email clearer; and probably should not have mentioned the legal route in a second email. If still left ignored I am sure they could have sent a certified letter if still no action was taken.
The articles mention of the link back being a paid for link is exactly what it is - in exchange for not paying $6000/year you have the option of placing a link on your site. It's a fair option.
Even still there would be no cause for legal action... what would the damages be?
They could simply shut off the service for the customer like every other service provider in the world would do...
Not every service provider works that way - I've seen plenty of hosting companies who just start charging overage charges - it would be stipulated somewhere in their TOS which most likely would also have the wording that it can be changed at any time. I'm not justifying the action - just saying that it does happen.
They could, you know, turn off the widget so that people that don't pay won't have access. Shockingly high tech, but that's why they get paid the big bucks.
I expected to come here and see comments lambasting supportbee for being whiny; I am surprised by the tone here. I think a lot (certainly not all) of the problems with the freemium model stem from the users. Just because it's free doesn't mean that it's always going to be free and that you don't have to read and comply with the terms of service.
In this case, for one it's not clear to me that we've gotten the whole story. In particular, what were the original terms of service, and how did they change? Did supportbee read and comply with them? The current ToS says explicitly:
>"Any notice or other communication to be given hereunder will be in writing and given (x) by Gigya via email (in each case to the address that you provide), (y) a posting on the Gigya Site or (z) by you via email ..."
And really, did they have to send any notice at all? If supporbee was failing to comply with the ToS, couldn't Gigya cut off service or take legal action, sans warning?
Meanwhile, supportbee doesn't want to put a link on the webpage for a service that they use and benefit from for free, and they throw a small public temper tantrum about it, and we are sympathetic? I'm just surprised. Aren't we overreacting about "legal threats"? Isn't this pretty standard and run of the mill? It could make more of an effort to make you feel good inside, but that's not really enough to make it wrong.
I think warning them that Wildfire would be disabled for them on a certain date if they didn't pay/add a link would be more reasonable, but they just threatened legal action. They didn't even suggest stopping use of it, almost implying that having used it in the past indebted them.
One of the best freemium products I use is github. This discussion made me wonder if they are profitable... (the answer is yes) I dug up this old HN thread: http://news.ycombinator.com/item?id=3593980
Other than the "powered by rackspace" in the footer, it's blessedly ad free.
I do not think that word means what you think it means.
It's a legal term to describe somebody getting money through abuse of their authority (e.g. requiring bribes under threat of prosecution) or charging illegal interest rates (e.g. usury). It doesn't mean "setting your prices too high but your customers can leave". Because, if it were extortion, SupportBee wouldn't be able simply to remove the widget and end the problem.
I don't really see a problem with what they are asking. They want to be paid either in ad links or in subscription fees. The user of the service who wrote the article doesn't wish to do either. He also (in their view) ignored their previous email about it, so the second email is slightly less polite about it and brings up the possibility of legal action.
I see how it came to this: he says he didn't notice the previous email. Given that perhaps he should have more sympathy for their position believing their request has gone ignored.
I do agree that legal action claims are premature. It's also not very clear if they could prevail in a theft of services case against someone using their service after being asked not to (obviously consent to use the free version has been withdrawn).
Clearly it would be a lot simpler to shut down the former client's access than it would be to drive something through the legal system. It could be argued that without properly notifying customers a service is about to be shut down, the customer might have cause to bring legal action against the company, this may be why they are doing notifications and requests rather than just unexpectedly disconnecting.
Either party taking legal action at all in such a case is probably a foolish move. Not because it's a reaction to "not monetizing", but because it is unlikely there would be a positive outcome for any of the parties in such an action.
Blogging one's (I think) unjustified rage seems as premature as the legal threats.
Now looking at another angle. I don't think ad links are worth $6000, but the company says they would be happy with that. It sounds like the $6000 figure might actually be a fake number that they believe will motivate users to choose ad links instead, which is the real goal. The way they have approached this goal is poor. In this case, the user obviously doesn't want to use an ad link. Perhaps he would be willing to pay $100 a month instead of $500? We'll never know because of the way it was handled.
Both sides should have given the other side more of a benefit of the doubt until determining the real intentions of the other party.
edit: this being vigorously downvoted is pretty amusing.
There are 17 different emails they could have sent to SupportBee that would have been more constructive than this.
I wonder if the Gigya team is too young to know better or if they have back-breaking pressure on them from their investors to turn any sort of profit before they are all taken out to sea and shot.
Obviously a stupid response, but really seems to be a response out of pure desperation more than anything.