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Software companies absolutely need recurring revenues to survive, new users are hard and expensive to get, and you need to keep an active development team. Hist

Software companies absolutely need recurring revenues to survive, new users are hard and expensive to get, and you need to keep an active development team. Historically it was upgrades, you gave customers new features in trade for upgrade revenue, which was usually a great deal for all. But nowadays that's lots harder, upgrades don't exist on iOS at all. And when their key features are already in the product, lots of users won't see the point of upgrading. But what they and the author miss is that keeping software operating is a great deal of work. In 1Password's case just compatibility and bug fixing on 4 or 5 operating systems is likely a substantial ongoing effort. On iOS alone my guess is they have to support 3 different major OS versions at a time. The disconnect is users who bought a version that worked on iOS 7 or Windows 7 and never paid a dime since expecting a free Windows 10 and iOS 11 update.

Torkgin 9y ago
Companies managed to survive a few last decades without having subscriptions and suddenly they need it to survive? Upgrades exist on iOS, you just release a new app. It is not different from times before App Store. Stop tolerating this subscription model or you will regret it one day once everyone switches to it and you will be paying 200 bucks each month to use your software and if you stop you will have nothing.
- valuearb 9y ago
  An upgrade means you can charge 30-40% of the retail price of the new version to existing users. That doesn't exist on iOS, Apple doesn't even let developers know who your customers are.
  - Torkgin 9y ago
    There is a way around it. When you release a new version you offer it for cheaper for limited time and you notify your existing customers. Of course, some new customers will buy it as well when it is discounted but it is acceptable loss.
    - valuearb 9y ago
      Sorry, just think about it, that's a terrible solution. First, remember that the Apple App Store doesn't give you any way to directly notify existing customers. See my other post, it's a great deal of work to induce customers to give you email addresses/etc. But lets say you have emails for most of your users, or that you autoupdate your app to notify them that the new version is out and for a limited time available for a cheap price. Most of your users are going to miss this email, or forget about the discount, or not use the app during the discount period and never see the notice. Those who miss the discount window are going to be pissed. That's going to be a lot of 1 star reviews. Some are going to be pissed they, as long standing users, didn't get a "real discount" since you gave it to anyone who bought it at the same time. That's more 1 star reviews. But the worst problem is you are discounting the value of your product to new users. Your retail price should be set where it maximizes long term revenues (if you thought you would make more money by discounting you'd already be doing that). For existing users who have already paid you for much of the value, you want to set your upgrade price at a reasonable value for the additional features of the new version. That price normally should be lots lower than retail, essentially 20-30% in any mature product. By giving the new users a price that is the 20-30% of what they would normally pay, you are leaving a ton of money on the table. Worse, you are front-loading sales. Anyone who planned to pay full retail in the future will rush to take advantage of the discount. How do you think sales for the rest of the year will look? Imagine you expected to sell 36,000 copies to new users this year at $10 each, or a net of $252,000 this year after Apple's 30% fee. You announce the new version is only $3 on the store for a month, but only tell the 50,000 existing users that you have email addresses for. You get a great response from them, and sell 20,000 units to existing customers the first month, netting $40k. But instead of selling your typical 3,000 units to new users the month, you instead sell 12,000 units to new users. What happened? Well, anyone who was likely to purchase this year and found out about the huge temporary discount, bought now. And lots found out, either by checking the store, or hearing from existing users (50k people have lots of friends), or from bloggers, or one of the hundreds of discount alert services, etc, etc. And by front loading their purchases, your sales will be lower over the remainder of the year, by the 9,000 extra new users who took advantage of the discount. So instead of netting $292k this year, you are going to net less. How much less? Your 36k in new users now net you only $168k, for a total of $208k, costing you $84k or 25% of revenues. The problem with discounting for everyone is that the shorter the discount period, the angrier your existing users will be. And the longer the discount period the more money it will cost you. It's a no win approach. You absolutely need a way to qualify existing users to provide the upgrade price, or it can't work. You'd be better off never discounting and forcing existing users to pay full price to re-buy a slightly better version of the app they already own.
evgen 9y ago
Then charge for the upgrade by doing the standard major version bump (Foo2, just like Foo but now with more Bar!) and don't try to bullshit us. Companies don't need recurring revenue to survive, they need to sell product to survive. If their biz model consists of trying to bleed their current customer base one drop at a time I will look elsewhere. -current 1password user and evangelist who will drop it in a heartbeat if forced into a subscription
- BuleBule 9y ago
  This is the correct answer. Every time I hear that a software vendor needs recurring revenue to survive, I think back to the entire history of the software industry where this was clearly not the case until every recently. Its gotten to the point now where anyone who makes some sort of software believes that are a service that must be paid for by subscription. Don't be those guys, have a good long hard think about why you deserve that recurring revenue and if its not immediately obvious, chances are you are just chasing the dollar rather than trying to solve a problem.
  - valuearb 9y ago
    You don't know much about the history of software sales. I've worked at software companies for 30 years and you are wrong. The first company i worked for folded down from 12 employees to 3 because revenues couldn't support us. We got our first upgrade out ($29 for existing customers on $99 retail) and it saved the company. Two years later we had 4 products and 30 employees. If we had been forced to give the upgrade away for free to existing customers like iOS requires, we would have shut down.
- valuearb 9y ago
  iOS doesn't allow you to charge existing users for a version bump.
  - evgen 9y ago
    It is an entitrely new package that shares part of the name. I could provide numerous examples, but you already know about them. You keep minor version bumps for fixes and patches while major changes you plan to charge for are a part of the new package.

Torkgin 9y ago

Companies managed to survive a few last decades without having subscriptions and suddenly they need it to survive? Upgrades exist on iOS, you just release a new app. It is not different from times before App Store. Stop tolerating this subscription model or you will regret it one day once everyone switches to it and you will be paying 200 bucks each month to use your software and if you stop you will have nothing.

valuearb 9y ago
An upgrade means you can charge 30-40% of the retail price of the new version to existing users. That doesn't exist on iOS, Apple doesn't even let developers know who your customers are.
- Torkgin 9y ago
  There is a way around it. When you release a new version you offer it for cheaper for limited time and you notify your existing customers. Of course, some new customers will buy it as well when it is discounted but it is acceptable loss.
  - valuearb 9y ago
    Sorry, just think about it, that's a terrible solution. First, remember that the Apple App Store doesn't give you any way to directly notify existing customers. See my other post, it's a great deal of work to induce customers to give you email addresses/etc. But lets say you have emails for most of your users, or that you autoupdate your app to notify them that the new version is out and for a limited time available for a cheap price. Most of your users are going to miss this email, or forget about the discount, or not use the app during the discount period and never see the notice. Those who miss the discount window are going to be pissed. That's going to be a lot of 1 star reviews. Some are going to be pissed they, as long standing users, didn't get a "real discount" since you gave it to anyone who bought it at the same time. That's more 1 star reviews. But the worst problem is you are discounting the value of your product to new users. Your retail price should be set where it maximizes long term revenues (if you thought you would make more money by discounting you'd already be doing that). For existing users who have already paid you for much of the value, you want to set your upgrade price at a reasonable value for the additional features of the new version. That price normally should be lots lower than retail, essentially 20-30% in any mature product. By giving the new users a price that is the 20-30% of what they would normally pay, you are leaving a ton of money on the table. Worse, you are front-loading sales. Anyone who planned to pay full retail in the future will rush to take advantage of the discount. How do you think sales for the rest of the year will look? Imagine you expected to sell 36,000 copies to new users this year at $10 each, or a net of $252,000 this year after Apple's 30% fee. You announce the new version is only $3 on the store for a month, but only tell the 50,000 existing users that you have email addresses for. You get a great response from them, and sell 20,000 units to existing customers the first month, netting $40k. But instead of selling your typical 3,000 units to new users the month, you instead sell 12,000 units to new users. What happened? Well, anyone who was likely to purchase this year and found out about the huge temporary discount, bought now. And lots found out, either by checking the store, or hearing from existing users (50k people have lots of friends), or from bloggers, or one of the hundreds of discount alert services, etc, etc. And by front loading their purchases, your sales will be lower over the remainder of the year, by the 9,000 extra new users who took advantage of the discount. So instead of netting $292k this year, you are going to net less. How much less? Your 36k in new users now net you only $168k, for a total of $208k, costing you $84k or 25% of revenues. The problem with discounting for everyone is that the shorter the discount period, the angrier your existing users will be. And the longer the discount period the more money it will cost you. It's a no win approach. You absolutely need a way to qualify existing users to provide the upgrade price, or it can't work. You'd be better off never discounting and forcing existing users to pay full price to re-buy a slightly better version of the app they already own.

evgen 9y ago

Then charge for the upgrade by doing the standard major version bump (Foo2, just like Foo but now with more Bar!) and don't try to bullshit us. Companies don't need recurring revenue to survive, they need to sell product to survive. If their biz model consists of trying to bleed their current customer base one drop at a time I will look elsewhere. -current 1password user and evangelist who will drop it in a heartbeat if forced into a subscription

BuleBule 9y ago
This is the correct answer. Every time I hear that a software vendor needs recurring revenue to survive, I think back to the entire history of the software industry where this was clearly not the case until every recently. Its gotten to the point now where anyone who makes some sort of software believes that are a service that must be paid for by subscription. Don't be those guys, have a good long hard think about why you deserve that recurring revenue and if its not immediately obvious, chances are you are just chasing the dollar rather than trying to solve a problem.
- valuearb 9y ago
  You don't know much about the history of software sales. I've worked at software companies for 30 years and you are wrong. The first company i worked for folded down from 12 employees to 3 because revenues couldn't support us. We got our first upgrade out ($29 for existing customers on $99 retail) and it saved the company. Two years later we had 4 products and 30 employees. If we had been forced to give the upgrade away for free to existing customers like iOS requires, we would have shut down.
valuearb 9y ago
iOS doesn't allow you to charge existing users for a version bump.
- evgen 9y ago
  It is an entitrely new package that shares part of the name. I could provide numerous examples, but you already know about them. You keep minor version bumps for fixes and patches while major changes you plan to charge for are a part of the new package.