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AWS prices on a cost basis, not value. That is you only pay for the input, not the output. Value-based pricing works well if your product is aligned to revenu

by sunir 6y ago

AWS prices on a cost basis, not value. That is you only pay for the input, not the output. Value-based pricing works well if your product is aligned to revenue or cost savings, and you can attach a clear business objective to the product. AWS is of course completely horizontal and therefore can serve an infinite number of business objectives excellently; and it does.

Silhouette 6y ago
How AWS pricing works in practice is complicated, which is the problem I was trying to illustrate. It's mostly based on usage/capacity, but hopefully for a SAAS product, the demand for chargeable AWS resources is strongly correlated with levels of user engagement and that in turn with levels of revenue.
- sunir 6y ago
  I agree with you. I think the lesson we're meant to take on the value-based pricing is you can have complex pricing if it is aligned tightly to the value perceived. It can be very natural. Look at Stripe's pricing. It's a nightmare to explain, but makes sense when using the platform. I like that way of thinking; it has a lot of resonance and power.
  - Silhouette 6y ago
    I think we probably do disagree to some degree here. In particular, Stripe was actually my next choice as an example of how not to do transparent value-based pricing, precisely because its pricing used to be simple and clearly tied to the value in processing a transaction, but over time it has drifted away from that into something that I (running a long-time Stripe merchant) don't find natural or easy to remember. Stripe now seems to have several distinct services, each with their own pricing. It's moved some functionality that used to be inclusive into those other services at extra charge. It's grandfathered, but not forever, some customers on different rates and different functionality shifts. It's stopped waiving some fees in cases of reversed transactions. There are different possible fees for international payments depending on locations, on top of any currency conversion fees and exchange rates. I could no longer tell you, without looking things up, what we're paying to Stripe for any given transaction now or how much of it Stripe would keep if for example we later decided to refund that transaction. I do know that the added complexity has resulted in higher overall fees for us, and that has certainly had a deterrent effect within my own businesses and professional network. For example, while it wasn't the only factor in our decision, my new business has looked elsewhere for payment processing. A few years ago, all of the founders would probably have just assumed by default that we'd use Stripe, because we'd all had generally positive experiences with it before.
sokoloff 6y ago
I would argue that AWS does not price outgoing bandwidth on cost-basis, or at least prices it in a way that is not obviously-to-me related to their costs. That's priced more on lock-in or "because we can"basis. The pricing discrepancies between Lightsail and the rest of the platform seem to support this point of view.

by sunir 6y ago

Silhouette 6y ago

How AWS pricing works in practice is complicated, which is the problem I was trying to illustrate. It's mostly based on usage/capacity, but hopefully for a SAAS product, the demand for chargeable AWS resources is strongly correlated with levels of user engagement and that in turn with levels of revenue.

sunir 6y ago
I agree with you. I think the lesson we're meant to take on the value-based pricing is you can have complex pricing if it is aligned tightly to the value perceived. It can be very natural. Look at Stripe's pricing. It's a nightmare to explain, but makes sense when using the platform. I like that way of thinking; it has a lot of resonance and power.
- Silhouette 6y ago
  I think we probably do disagree to some degree here. In particular, Stripe was actually my next choice as an example of how not to do transparent value-based pricing, precisely because its pricing used to be simple and clearly tied to the value in processing a transaction, but over time it has drifted away from that into something that I (running a long-time Stripe merchant) don't find natural or easy to remember. Stripe now seems to have several distinct services, each with their own pricing. It's moved some functionality that used to be inclusive into those other services at extra charge. It's grandfathered, but not forever, some customers on different rates and different functionality shifts. It's stopped waiving some fees in cases of reversed transactions. There are different possible fees for international payments depending on locations, on top of any currency conversion fees and exchange rates. I could no longer tell you, without looking things up, what we're paying to Stripe for any given transaction now or how much of it Stripe would keep if for example we later decided to refund that transaction. I do know that the added complexity has resulted in higher overall fees for us, and that has certainly had a deterrent effect within my own businesses and professional network. For example, while it wasn't the only factor in our decision, my new business has looked elsewhere for payment processing. A few years ago, all of the founders would probably have just assumed by default that we'd use Stripe, because we'd all had generally positive experiences with it before.

sokoloff 6y ago

I would argue that AWS does not price outgoing bandwidth on cost-basis, or at least prices it in a way that is not obviously-to-me related to their costs. That's priced more on lock-in or "because we can"basis. The pricing discrepancies between Lightsail and the rest of the platform seem to support this point of view.