

Ask YC: The Carrot or the Stick? - Locke

I'm getting close to a major update to my website.  Right now I think it's
okay or maybe good, but after the update I think it will be a great site.  The
kind that I hope people will pay for.  I'm planning on introducing a paid
membership, and as such, I need to figure out how to get my users to switch
from free acounts to paid accounts.<p>I've been classifying my ideas as "carrots" or "sticks".  By my definition, an
effective stick should force a large percentage of users to pay or leave.
For example, a 30-day free account.  That's a very effective stick, at the end
of 30 days every user will either pay or leave.<p>By contrast, an effective carrot will induce a smaller percentage of users to
pay while <i>not</i> forcing any (or few) to leave.  For example, I may be very
happy with my free account, but when I see that I can have access to really
cool bonus feature X if I sign-up for a paid membership, I just can't resist.<p>The trick is that the carrot can't be core to the application.  If a free
account is crippled because really important feature Y is only available to
paying members, you're looking at a pay or leave situation and, thus, a stick.<p>If your users don't interact with each other -- that is, there's no network 
effect -- I think a strong stick is obviously best.  There's no benefit to
keeping users around in free accounts.  Best for them to convert to a paid 
account or leave.  But, if there is a network effect, then, I think, it 
becomes much more complicated.  Should only carrots be used?  Or, perhaps a
gentle stick?<p>I'd love to hear examples of effective carrots or sticks.  What works?  What 
doesn't?  Is it better to be nice and use only carrots?  Or, is it better to 
force the issue with a stick?
======
kyro
I'm assuming the site you're speaking of is vying.org, from your profile. Why
don't you just ask a straight forward question pertaining to the site
specifically? You'd get much more tangible advice.

Personally, as a user, if you gave me a 30-day free account, I'd either find a
way to game it, or just leave once the free period is over. I get the whole
DHH schtick with charging users for a nice service, but free is free, and I
don't think many people would pay for a game site, unless something about your
site shines far beyond the multitude of other web game sites, if you're
referring to vying.org.

~~~
Locke
I didn't want to get to specific, because I'm generally curious about this.
Also, it seems like an issue that would effect a lot of startups, and I think
it'd be better for everyone if the discussion was more general.

As to your comments about my site specifically, I think you're absolutely
right about the 30-day free account. I think if I force anybody to leave I'd
risk killing the site. I'd rather run it as a hobby site than kill it.

------
tstegart
Take a look at most blogging platforms for ideas of carrots or sticks. I.e.,
you get a free blog, but can get a lot more if you pay.

I think your question boils down to four things:

What is core to enjoying the site? I haven't looked at your site, but someone
mentioned games. If you want people to come back, it should be enjoyable. If
they come back and something they expect isn't available to them and requires
payment, they might begin to resent you. If you're going to embrace the
freemium model, I think most successful people have made as much of the core
stuff as free as they can. I'm not saying make as many things free as you can,
I'm saying make as many important core elements as free as you can.

What are your competitors doing? Two things you should look for. One, what are
they charging for that you're ok with giving away for free? Its a marketing
tactic. You can get their users if you provide something better. There's
nothing worse than charging for something just because you needed to pick
something to charge for. People will look at it and say "Thats so simple, why
isn't that free?" Two, what do their users think about the things they charge
for/give away. This is a competitive intelligence tactic. Go read their
forums, and look for clues. Did they try and charge for something and have a
huge uproar? Or did people just say, "sure, ok". What is the most requested
feature they have? Its pointless to make your competitor's mistakes when you
can see what the results were. Don't copy their bad choices. But to know what
was bad you need to do some research.

How much does it cost: I think most people are ok with paying for stuff they
know costs you money, IF you clearly make that the case from the start. If you
give away almost everything for free and then try to introduce cost into the
mix, it doesn't go down as well as it would than if you had said upfront "Hey,
this costs me a lot to provide, so its going to have to go into the premium
side." You also have to think somewhat long term. Advertising won't pay for
everything, and its likely that you can't keep covering all the costs. You
won't be around long if everything is free. If something is very expensive to
provide, ask people to pay for it.

Don't be afraid to change: As your site grows and gets older, get feedback on
what parts of your site people really use. You can switch stuff around from
the pay or free columns and experiment a little. If there is one feature
people consistently ask for to be included on the free side, and it hardly
costs you anything to provide it, why not give it away?

A word about advertising. I may be in the minority here, but I don't care if
advertising is on the site or not as long as its not annoying. I wouldn't pay
to have no ads, because I'm not bothered by them. If I was bothered by them, I
probably wouldn't use your site. Why don't you research how well that has
worked for others. Do people actually pay to remove ads, or is it just
something in a list of things to make money that nobody has actually bothered
to research lately to see if it works? Almost every site we use today has ads,
its just a fact. I say keep them across the site, make them somewhat
inconspicuous, and use the revenue to offset the things you give away for
free.

~~~
Locke
Thanks, that's a lot of very good advice!

About ads... large game sites (competitors) tend to have lots and lots of
very, very annoying ads. But, they're free. I'd rather be a smaller,
membership site without all the annoying ads. So, I'm reluctant to even use
ads on free accounts because I think it sends the wrong message about what I
want my site to be.

~~~
tstegart
What about few, non-flashy non-annoying ads? :) I mean, you're the owner, you
get to decide what ads you want, and you're allowed to place restrictions on
what they can do, look like, etc. The more restrictions, the less advertisers
you'll find, of course, but some simple rules that you set in place can
differentiate your site. For example, Digg.com only has two ads on the front
page. One above the fold, one below. I don't mind it at all. Just think, where
your competitors have cluttered and frantic designs, yours could be clean and
clear. One other point. People may pay for ad free versions because the ad
version is incredibly annoying and cluttered and hard to navigate. If your
free version is nicely done (which I recommend), you can run ads site wide
without annoying anyone and use memberships to get repaid for the things that
really cost you money.

------
spydez
If your site is the kind that can be of use to both persons and businesses,
you can set up a pricing/features structure that encourages businesses to pay
a decent amount, but lets individuals get by for free or cheap.

I believe DHH touched on that in his Startup School talk: Businesses are
usually more willing to part with their money and also tend to stick around
longer.

Whatever you do, be sure to let people get a really good feel for your site
before bugging them to reach for their wallet...

------
lux
I'd lean towards the "carrots" myself, and there are lots of potential ones
(user customizable profiles, more simultaneous games, "pro" games, etc). Look
at what other successful startup multiplayer game sites are doing and try some
out. With carrots, you can still offer a compelling free service but there are
lots of appealing things that dedicated users will pay for. weewar.com seems
to have succeeded in this, for example (I've taken my wallet out for them in
the past, just don't have time for games these days otherwise I'd still be on
there).

I would think the key to retaining free players is the quality of the game(s)
themselves, and the network effect of having enough players to play against.
Checkers probably wouldn't retain me for more than a game, but some of the
others on your site seem like they might. Scrabulous seems to be exploding on
Facebook for example, while only one or two people I know play Chess...
(unfortunately ;)

Maybe a unique game like Lost Cities from flexgames.com -- that was a neat
game for a while that you can't find anywhere else...

------
mlinsey
Are the enhancements you're planning with the next version separable from the
rest of the site? It sounds like you answered your own question: you feel that
the stuff you're adding to the site will make it worthy of paying for, as
opposed to your current site which presumably is less worth paying for (but it
sounds like you have a significant number of users happy with your free site).
Why not just charge for the new features that you're adding?

------
redorb
forcing users to leave is a hard thing for me to comprehend as being the
"answer" to your question. So I think you should avoid most Sticks

~~~
redorb
The the guy who just down modded the comment, When is forcing users to leave a
good idea? ... and where is your response to the question>?

~~~
Locke
I didn't downmod you, I think it's a good question. I think forcing users who
_won't pay_ to leave _might_ be a good idea in some cases. Consider the cost
in server resources (if it's a server-based app), customer support, etc. It
may be too expensive to keep users who won't pay.

Of course, that assumes you can get plenty of paying users in the first
place...

------
tyohn
I think I'd start by watching the startup school video
[http://www.omnisio.com/startupschool08/david-heinemeier-
hans...](http://www.omnisio.com/startupschool08/david-heinemeier-hansson-at-
startup-school-08)

------
xenoterracide
can you explain your site more? I also have to say I like githubs pay for
privacy or space.

~~~
Locke
My site is a turn-based games site. There are many others like it, most either
charge for memberships or are free, advertising-based sites. Some seem to be
very successful, some I would classify more as hobby sites.

A few of my current ideas are:

    
    
      * Vacation days (a very standard feature... they extend the time limit on your games so you don't while you're away on vacation) (carrot)
      * Advertising free (I don't have advertising now, so I'd have to introduce it for the free accounts) (carrot or stick?)
      * 30-day free membership (stick -- don't like this idea)
      * Limit on the number of simultaneous games a user can have (stick -- don't *really* like this idea, either)
      * Prize tournaments for members only (need to research this idea... not sure I like it) (carrot)
    

And I'm considering a bunch of other minor perks (customize your profile,
change colors, etc...) that would count as very small carrots.

~~~
r7000
You can also give paying members something besides additional functionality.
Game sites with even minor social functions naturally bring out the
competitive sides of players. A "supporting" player could have their username
in bold or with a star beside it making them stand out more in "Now Playing"
or "Top Rated" lists.

~~~
Locke
That's a very good point. I've had a player ask for a "feature" where he could
have his username appear in red instead of the normal color. I think people
like to be able to customize their internet personas and those kind of
features would make nice carrots.

------
xlnt
the carrot stick

