4 ms·

Ask HN: If 37signals apps were free...

4 points by fjabre 17y ago

Ok so in the next few months I'll be releasing a web app similar in functionality to several of the 37signals apps and I've had quite a hard time deciding on the exact revenue model/pricing structure to aim for. Lately I've seen quite a lot of discussion on HN and even from 37signals themselves about whether or not you should aim to get mega-eyeballs, aka Facebook, or whether you should grow more organically by signing up paying customers - building a smaller but more immediate cash flow over time, aka 37signals. I'd like to imagine a scenario in which Basecamp and several of the other 37signals apps were free. In this hypothetical they might also have a freemium deal where they have a ridiculously cheap pro version like Google Apps for business - $50/user/year. Currently, it's safe to assume with their current model they are steadily growing market share and are making several $million in annual revenue. I wonder, however, where they'd be today if they had a purely free, ad supported system in place of their current monthly fee plans. This also assumes they had other means of funding themselves whether raising more money through angels/VCs or they depended more heavily on their consulting business. Anyway, I pose this question to HN. I'm not really sure how to answer it. My only doubts about a free model for them would be that possibly businesses expect to pay for services much more than individuals do so perhaps they wouldn't be perceived as high quality as they are now.. but then again if they had millions more users than they do now with a targeted ad system in place perhaps they'd be that much better off. ?

sfall 17y ago
free vs paid is not the question i would be asking. I would be asking why? why use your service over another. Is it tailored for an industry? specific feature set? Or are you just jumping on the trolley?
- fjabre 17y ago
  Tailored for the same crowd 37signals appeals to - small to medium sized web savvy businesses and individuals.
- fjabre 17y ago
  Why use my service..? Well it's more targeted to users of google apps with specific integration for that market. It will also be quite different from the look and feel of 37signals apps. They have a nice feature set for sure but there is definitely some gaps in functionality in several of their apps which I think others could address...
  - sfall 17y ago
    if it were my product I would make it for a specific industry with features that match that industries need. - music venues - promotional tools, scheduling, checklist, subcontractor communication, etc - restaurants - recipes, scheduling, new hire forms, inventory etc these are just off the top of my head look at a smaller group but you could justify a higher price.. ps there is software for larger restaurants that cost 100k that is good but the cheap stuff stinks, additionally construction online accounting software is led by a company from deerfield il (suburb of Chicago) the name escapes me right now
maxwin 17y ago
If copycat apps could succeed, there would be millions of Twitter and facebook clones since it is not that hard to duplicate their technology. What make 37 signals successful are not just their app, but their brilliant marketing skills,well known blogs and fantastic designs. These set of skills are not that easy to copy.
- deleted 17y ago
  [deleted]
- fjabre 17y ago
  Agreed. I wouldn't even attempt to copy them and would not consider this a copycat app. I only use them as a shining example of well marketed/executed office productivity apps, a large space in which I intend to play in. I just wonder if they would have been more successful with a different revenue model...
- growt 17y ago
  Apps like Twitter and Facebook need a critical mass of users to function ("all my friends are there"). But online project management works if you use it just for your team. So don't think your examples match this situation. You're right with the marketing of course, but that could work as well for other markets.
  - ssharp 17y ago
    This is exactly right. And given the somewhat simple nature of a product like Basecamp, I'm surprised that no cheaper, legitimate alternative has really popped up and/or gained traction.
  - fjabre 17y ago
    Yeah quite true. FB & Twitter are #1 in their markets (Twitter being a true innovation) not b/c they have a few million users but b/c they have 10s of millions and in FB's case 100s of millions. No one even knows about the #2s in that space. Whereas with 37signals and other productivity apps there is plenty of room to be #2 or #3 or even carve out a nice well paying niche for yourself - all but impossible in an ad supported model where you need that critical mass or you go the way of Friendster..
Travis 17y ago
Lots of businesses prefer to pay a small fee. It puts a(n implicit) contract in play. I pay you money, you operate this for me. Free apps are scary from the POV that they could either disappear, or are insecure. Something about a company being willing to charge makes them appear more legit to other companies. Argue it all you want, it's definitely the truth to a certain market segment. And 37 Signals is positioned to dominate that market (although not as much as MS).
- fjabre 17y ago
  Thanks for this Travis. That's pretty much what I was looking for. I would tend to agree with this line of reasoning.
  - Travis 17y ago
    NP. Really, this is where you hopefully have the rest of your business figured out. If you want to target corporate IT, free probably won't work. But you could do a freemium, or an ad-supported site (prob. not a good idea; people won't like seeing ads show up on "their" documents...) If you've done your customer discovery, validation, and profiling correctly, you should be able to answer this question by stepping through the use cases of each of your example users. If you haven't done that stuff, I highly recommend running to Amazon.com and picking up Steve Blank's "4 steps to the epiphany" book. It'll help, a TON, with figuring out exactly what your company and product is.

4 points by fjabre 17y ago

sfall 17y ago

free vs paid is not the question i would be asking. I would be asking why? why use your service over another. Is it tailored for an industry? specific feature set? Or are you just jumping on the trolley?

fjabre 17y ago
Tailored for the same crowd 37signals appeals to - small to medium sized web savvy businesses and individuals.
fjabre 17y ago
Why use my service..? Well it's more targeted to users of google apps with specific integration for that market. It will also be quite different from the look and feel of 37signals apps. They have a nice feature set for sure but there is definitely some gaps in functionality in several of their apps which I think others could address...
- sfall 17y ago
  if it were my product I would make it for a specific industry with features that match that industries need. - music venues - promotional tools, scheduling, checklist, subcontractor communication, etc - restaurants - recipes, scheduling, new hire forms, inventory etc these are just off the top of my head look at a smaller group but you could justify a higher price.. ps there is software for larger restaurants that cost 100k that is good but the cheap stuff stinks, additionally construction online accounting software is led by a company from deerfield il (suburb of Chicago) the name escapes me right now

maxwin 17y ago

If copycat apps could succeed, there would be millions of Twitter and facebook clones since it is not that hard to duplicate their technology. What make 37 signals successful are not just their app, but their brilliant marketing skills,well known blogs and fantastic designs. These set of skills are not that easy to copy.

deleted 17y ago
[deleted]
fjabre 17y ago
Agreed. I wouldn't even attempt to copy them and would not consider this a copycat app. I only use them as a shining example of well marketed/executed office productivity apps, a large space in which I intend to play in. I just wonder if they would have been more successful with a different revenue model...
growt 17y ago
Apps like Twitter and Facebook need a critical mass of users to function ("all my friends are there"). But online project management works if you use it just for your team. So don't think your examples match this situation. You're right with the marketing of course, but that could work as well for other markets.
- ssharp 17y ago
  This is exactly right. And given the somewhat simple nature of a product like Basecamp, I'm surprised that no cheaper, legitimate alternative has really popped up and/or gained traction.
- fjabre 17y ago
  Yeah quite true. FB & Twitter are #1 in their markets (Twitter being a true innovation) not b/c they have a few million users but b/c they have 10s of millions and in FB's case 100s of millions. No one even knows about the #2s in that space. Whereas with 37signals and other productivity apps there is plenty of room to be #2 or #3 or even carve out a nice well paying niche for yourself - all but impossible in an ad supported model where you need that critical mass or you go the way of Friendster..

Travis 17y ago

Lots of businesses prefer to pay a small fee. It puts a(n implicit) contract in play. I pay you money, you operate this for me. Free apps are scary from the POV that they could either disappear, or are insecure. Something about a company being willing to charge makes them appear more legit to other companies. Argue it all you want, it's definitely the truth to a certain market segment. And 37 Signals is positioned to dominate that market (although not as much as MS).

fjabre 17y ago
Thanks for this Travis. That's pretty much what I was looking for. I would tend to agree with this line of reasoning.
- Travis 17y ago
  NP. Really, this is where you hopefully have the rest of your business figured out. If you want to target corporate IT, free probably won't work. But you could do a freemium, or an ad-supported site (prob. not a good idea; people won't like seeing ads show up on "their" documents...) If you've done your customer discovery, validation, and profiling correctly, you should be able to answer this question by stepping through the use cases of each of your example users. If you haven't done that stuff, I highly recommend running to Amazon.com and picking up Steve Blank's "4 steps to the epiphany" book. It'll help, a TON, with figuring out exactly what your company and product is.