

What do you pay for? - byosko
http://www.centernetworks.com/pay-for-web-services

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13ren
Right price is key. e.g. clearly it's not convenience per se, but convenience
for 99 cents.

But I'm puzzled at 37signals: their products were developed quickly (as they
boast), but there are no well-known competitors. _What's going on here?_

1\. 37signals is an effective geek PR company - or, thought-leaders for agile,
rails, etc. They blog, they keynote, they give. They teach a lot of useful and
interesting stuff (and I like it). They are cool. As a result, who knows about
their competitors?

2\. Pricing - starting at $24 per month ($288 pa) for basecamp. For a
business, the monthly charge may be attractive for cashflow and tax
(deductible), but neither are an advantage over copy-cat SaaS competitors.
They host it, which justifies a higher price for you - provided that the
hosting is a valuable benefit for you. They maintain it, and add features, so
this is like a maintenance charge, which a business would pay anyway.

However - if they retain "simplicity" (key to their philosophy) and _not add
features_ , what's to stop competitors from catching up?

3\. They add features in the form of new products (which they have done), and
the older ones get cheaper and cheaper til it's "normal".

4\. They have passed (or will) a special threshold of economies of scale, such
that competitors cannot catch them. With so many customers, their profit
margin per customer can be too low for competitors to enter. Their
competitors, offering a comparable price but with fewer customers, would not
be able to break-even. They'd need to grow their customer base much bigger.
But how long would that take? How much would it cost? What's the chance of
success (risk)? (37signals has other strengths, to make it harder) What's the
prize worth (reward)? 37signals isn't a madly profitable company, so why go
after them?

These arguments apply to a for-profit competitor - but what about a non-profit
competitor? i.e. open source? I'm really interested to hear other's opinions.

I'm not the first to wonder this:
[http://www.techcrunch.com/2006/07/06/bascamp-faces-
competiti...](http://www.techcrunch.com/2006/07/06/bascamp-faces-competition-
in-free-alternative/)

<http://wisdump.com/business/being-37signals-for-free/>

 _EDIT_ "By Jonathan Barket on April 7, 2006 5:24 am" makes some good points
(search for him - sorry, no permalink)

~~~
gscott
1\. Basecamp is well known within the developer community but not as well
known outside of that.

2\. The problem is not catching up, it everything else which is hard to
explain. The layout, the features to provide or to leave out, finding the
right mix is harder then the programming itself.

3\. Their new products are not very well integrated and have overlaps in
features so that is a weak point.

4\. A generic offering is not where the money is. You develop the generic
components and then you put them to work in a way that is specific for a
particular vertical market. You sign people up free to a generic version, then
once you have the vertical version done you offer them that at a higher price
point. You do offer a generic "pro" version and some buying of additional
useful "modules" for those you don't have a vertical version for.

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moses1400
interesting look - the itunes one makes sense - perhaps the same reason people
buy candy at the checkout

