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Wouldn't it be extremely difficult to build a sustainable business on random one-off payments from casual users?

by agota 7y ago

jakobegger 7y ago
So many businesses rely on one-off payments. It's a lot easier to get people to pay once than it is to convince them to pay every month.
- askafriend 7y ago
  It’s probably not a lot easier and lifetime value is probably a lot lower.
- agota 7y ago
  It's true that it's harder to sell people on a monthly subscription, but once you do, the revenue is much more predictable. From the entrepreneurs perspective, SaaS is a much more appealing business model, though of course customers would prefer to pay once instead of every month. Also, I'm not a technical person so I might be wrong, but I'd also imagine that an online video editing tool requires a lot of money to maintain, so random one-off $5 payments might not be enough keep the lights on.
  - jakobegger 7y ago
    > the revenue [on a monthly subscription] is much more predictable That's a common fallacy here on HN. But it's just not true that one-off payments aren't predictable. If you have a large enough number of potential customers, and some small fraction of them buys your product every month, you'll end up with very predictable revenue, even if each single customer only pays once. As the number of sales per month increases, the variance goes down, and you end up with remarkable constant revenue. I don't know enough about statistics to explain why that is the case, but I know from experience that it does work like this. Note that I'm not saying that pay-once is more or less profitable than subscriptions. I have no clue, and I suspect this strongly depends on the target audience. All I'm saying is that subscriptions are not "more predictable".
- kaikai 7y ago
  Customer acquisition is expensive, and if you have a subscription-based model you only have to get a customer once. If you're relying on one-off payments, every transaction comes with acquisition costs.
  - jakobegger 7y ago
    Customer acquisition can be expensive, but that's not a given. If your product is good enough that people tell others about it, you might not have any customer acquisition costs at all. (I know that because I sell software and spend almost no money on marketing)

Wouldn't it be extremely difficult to build a sustainable business on random one-off payments from casual users?

by agota 7y ago

Wouldn't it be extremely difficult to build a sustainable business on random one-off payments from casual users?

So many businesses rely on one-off payments. It's a lot easier to get people to pay once than it is to convince them to pay every month.

askafriend 7y ago
It’s probably not a lot easier and lifetime value is probably a lot lower.
agota 7y ago
It's true that it's harder to sell people on a monthly subscription, but once you do, the revenue is much more predictable. From the entrepreneurs perspective, SaaS is a much more appealing business model, though of course customers would prefer to pay once instead of every month. Also, I'm not a technical person so I might be wrong, but I'd also imagine that an online video editing tool requires a lot of money to maintain, so random one-off $5 payments might not be enough keep the lights on.
- jakobegger 7y ago
  > the revenue [on a monthly subscription] is much more predictable That's a common fallacy here on HN. But it's just not true that one-off payments aren't predictable. If you have a large enough number of potential customers, and some small fraction of them buys your product every month, you'll end up with very predictable revenue, even if each single customer only pays once. As the number of sales per month increases, the variance goes down, and you end up with remarkable constant revenue. I don't know enough about statistics to explain why that is the case, but I know from experience that it does work like this. Note that I'm not saying that pay-once is more or less profitable than subscriptions. I have no clue, and I suspect this strongly depends on the target audience. All I'm saying is that subscriptions are not "more predictable".
kaikai 7y ago
Customer acquisition is expensive, and if you have a subscription-based model you only have to get a customer once. If you're relying on one-off payments, every transaction comes with acquisition costs.
- jakobegger 7y ago
  Customer acquisition can be expensive, but that's not a given. If your product is good enough that people tell others about it, you might not have any customer acquisition costs at all. (I know that because I sell software and spend almost no money on marketing)