
The ‘Gowalla Situation’ - prateekdayal
http://teamblog.supportbee.com/2011/12/20/the-gowalla-situation/
======
thaumaturgy
I interact with non-technical people almost every day, and I can relate that
this is a concern that they have been far more vocal about lately. I don't
really understand how it became a concern, since I'd expect that they don't
follow startup news like I do, nor do they tend to be early adopters that
would have been burned by a service closing.

Every single of the half-dozen or so times that I've recommended Quickbooks
Online to someone, their major objection has been that they don't want to rely
on it because they're concerned that Quickbooks will just up and cancel it one
day. (Or break it.) Just a few days ago, one of my clients asked my opinion of
online backup services, especially Carbonite. Her first question was what she
would do if they didn't stick around. She's a pretty sharp individual, but not
tech-savvy, and even though I explained that in that case she could just sign
up for a different service, she still decided it was too risky to rely on.

For me, after reading HN for a while now, I've gotten a toin coss mentality
towards whether or not a particular startup will still be around in a year.

My hunch is that several classes of web-based startups are headed for trouble
and don't realize it yet. If you're building a game, if you're building a
Facebook app, if you're building something that people don't feel like they
have to rely on, you're fine. But, if you're trying to address a major
business problem or build something that people will have to trust for the
long term, I think your pool of available customers is shrinking, not growing.

The funny thing is that what the customers want is lifestyle businesses --
businesses that the founders are totally invested in and wanting to work on
for a very long time -- and lifestyle businesses catch a lot of derision in
startup circles.

~~~
happyfeet
Excellent points. Interesting to note that most startup businesses that go
through traditional investor route exit via acquisitions or getting acquired
to get returns for investors (or IPO).

I had this conversation with an angel investor with our team, when we said we
are interested in staying in business for a long time and build our user base
& let them speak for us. The investor said you need to take a call whether you
want a 'lifestyle' business or you want to take the other route to build scale
fast. Haven't heard from him yet. :) We were not convinced that we should
throw lot of advertisement money, get lot of eyeballs, convert 1 or 2% into
sales & just grow.

So, the question is: what kind of commitment can we give to our customers to
assure them that a B2B business here is to stay & serve them. The purpose is
to "exist" not to get acquired.

Would love to hear examples & stories of businesses that have managed to do
the balancing act.

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OoTheNigerian
tester who sent the email here :)

For 'serious software' that is doing business, the first thing I _now_ check
is Plans and Pricing. if there is none, it is almost a guarantee I will not be
using it seriously.

I will confess though, it was not always like this. I was once of the people
that Googled "Free Basecamp Alternatives" but all that changed when I started
understanding "if software owners do not make money, how can they survive?!"

We caused it by making people believe "delivering bits cost nothing"
forgetting that money was needed to pay the bills. Of course I still believe
services should have a free tier to allow non-power users test a service. But
that in itself is pricing strategy which has the word 'pricing' in it.

A product/service that has a business model does not mean it will shut down
but one that does not will certainly shut down.

Things things are turning around. The 37 Signal guys should get some sort of
recognition for being in the front of this struggle.

~~~
PedroCandeias
I'm with you.

    
    
      the first thing I now check is Plans and Pricing
    

Same here. And it annoys the hell out of me when there's none in sight. I
actually avoid apps which start their copy with the word "free".

    
    
      forgetting that money was needed to pay the bills.
    

And keeping the team motivated, let's not forget that. I understand why a
startup with big funding can afford to give away their service as a land grab
move, but two-man teams and solo founders with no cash in the bank? Often as
not, they're gone in a couple of months.

------
AndrewDucker
I am generally wary of any company that isn't using a business model
predicated on customers paying for a service.

If the business model is "Attract lots of people and then sell ads." then the
service will be oriented towards whatever provides the most clicks.

If the business model is "Get big, and then get bought out." then the service
will quite possibly vanish.

For throwaway services that I can switch to a new provider for, this is
possibly acceptable. But for anything I might want to base my own business on,
or store information I will care about in the future, doing so would be
foolhardy.

~~~
andrewcross
I'll second this. It doesn't mean that these others can't exist (Foursquare is
a big example), but there seems to be a valley of death for these types.
Either go massively big or fail.

At least with a pay for use pricing scheme a company can do well and grow
slowly without having to hit that massive knockout.

~~~
drumdance
As an entrepreneur, this is why I favor starting B2B businesses. Sure, I would
love to create the next Internet/social phenomenon like YouTube, but those
markets are largely winner take all.

In B2B, you can be #2, #5, #10 or even higher and still have a successful
business. Back in the 90s I worked with an email marketing company that scaled
way too fast. The thinking was "get big or go home." Even as it cratered
during the dot-com crash, small players were emerging all the time, and many
of them are thriving today.

~~~
nithyad
Typically in a B2C business, users don't care much to know how long you have
existed or how long you will exist. If you shut shop, they switch to using
another free service.

But that's not the case in B2B. I do agree that B2B is more lucrative. But,
how do you convey to your potential customers that your service is here to
stay. Businesses are not comfortable moving from one service to another. And,
with so many start ups dying fast or pivoting fast, what's the best way for a
service to build trust with its potential customers?

------
ebaysucks
Prateek, I think it would help SupportBee if you mention you already have
another cash flow cow on autopilot.

~~~
prateekdayal
Thanks for the suggestion. Yes. We are going to redo the about us page and
mention that.

Also, my question was more around ways of signaling to your potential
customers that you have a solid roadmap and plan/ability to make it big and
sustainable and not sell out half way.

~~~
boundlessdreamz
What is the other cash cow ? :)

~~~
prateekdayal
It is <http://www.muziboo.com> that we have been doing for over 4 years. It
has about half a million users and we make good cash from ads + pro account.
Happy to answer any more questions

~~~
PedroCandeias
I can't find a "plans and pricing" page anywhere. Why is it hidden? I'm
curious, is it on purpose? Is there an advantage in doing so?

~~~
nithyad
@Pedro It is here: <http://www.muziboo.com/pro/>

'Plans & Pricing' is a very B2B expectation where customers come with the idea
of paying for a service. In a B2C service users only come with the expectation
of trying out a service and if they comfortable pay for premium services. So,
we show this page only after a user creates an account.

Users can actually be put off seeing a 'Plans n pricing' page especially for a
service like Muziboo.

The answer is: Yes, we did that intentionally :)

~~~
PedroCandeias
I'm put off by the _lack_ of a plans page, but there are so many apps which
hide it that, yeah, I thought it might be on purpose. It's very interesting to
learn your reasons, thanks for sharing!

By the way, how did you learn that users get put off by pricing pages? Was it
from traffic data or user feedback (or just your gut instinct)?

~~~
nithyad
User reaction. When we introduced our premium service (this we did with the
consent of our power users) after almost one year of giving free service, many
that joined new, wrote hate mails saying how everything in the internet should
be free. That's when we decided this has to be subtle. The basic service is
free. And, when a user clicks to share a track privately or choose higher
bitrate streaming, we prompt him/her to upgrade cos those are some of the
premium features in Muziboo.

After experiencing the service, users become comfortable and also know exactly
why we are better than the lot of other free services.

In B2C subtlety in this matter helps. But you can't do that in B2B. Potential
customers evaluate your service based on the pricing.

~~~
PedroCandeias
In short, it's another way to lower the barrier to entry. Well played.

From my experience with threddie I learned there are a great many people out
there who behave like consumers in the way they go about discovering new apps
but, because they're decision makers at their companies, they end up B2B
customers.

I'm not sure I like the idea of B2B saas companies employing B2C tactics en
masse, I fear it would make for a silly red-and-yellow landscape where
everything is FREE FOREVER SIGN UP NOW. Price transparency is good for
everybody and it helps move the market forward (material for a blog post right
there).

Alas, I fear I'm going on an off-topic tangent here, though the subject is
intriguing. Thanks a lot for sharing your insights in this matter. I might
drop you an email later. Cheers!

~~~
nithyad
Sure! Mail me at nithya@supportbee.com

There are some real interesting stats :)

------
mikegirouard
I find it interesting that you bring up Balsamiq. It was my switch from
Mockingbird to Balsamiq that triggered my weariness that AndrewDucker points
out.

Free services are quite nice, and I make great use of them (Wave Accounting,
and TeamLab for example) but I can't help to always wonder what their future
is and if/when they'll spring the email on me announcing their free plans were
just a customer acquisition strategy.

~~~
OoTheNigerian
I just saw wave accounting. Really well done! and also interesting business
model. They now have a _paid_ payroll service built on it.

------
jconley
This is definitely a real concern with the SaaS model and one of the reasons
big business has been reluctant to rely on it.

Source code escrow works really well to sell enterprise customers. Perhaps
there should be something similar for SaaS companies. An agreement, paid for
by the customer, that if the company fails or the service is no longer
supported, the customer will be given the ability run it themselves.

~~~
anothermachine
It's a nice idea, but has a fatal flaw:

Customers don't want to, and are not able to, operate a SAAS operation in
house. That's why they go SAAS in the first place.

Here's a variation, though: The vendor should open source their core software
and escrow some extensions (if they need an IP moat to stay in business), and
license their technology to a reputatable small consultancies, something like
Revolution Analytics (R language), Analytics Pros (Google Analytics) for use
in resale/redploy

------
chr15
I found this to be the case when selling to any kind of medium to large
business. One of the objections I repeatedly receive is that adopting a
startup's product is risky because the startup may not be around in the next
year.

