Behind the question of whether a billing system can help your SaaS business grow is the question of what it means for a SaaS business to grow. This guide tackles both — it creates a model you can use to approach SaaS growth and a 360-degree view of how your billing system fits into it. Read More >
Image Credit - Yair Hazout
In the 1800s, book publishers in Germany had it all figured out. They sold ideas for planned yet unprinted books to subscribers who were happy to pay in advance. It covered the publishing costs and helped them in gauging the interest a book would command.
Back then, it was called Praenumeration. Of course, now, we call it Crowdfunding.
The year was 2004, the idea of Crowdfunding wasn’t woven with the internet as well as it is today.
Dean Allen had an idea to bootstrap a web hosting startup named TextDrive. He needed cash. But, he wasn’t interested in traditional funding methods.
Instead, he decided to take a cue from 18th century German book traders. Even before TextDrive was released properly, he offered lifetime web hosting for an upfront cost of $200. Within 4 days, 200 people signed up and the startup raised a vital sum of $40,000.
It wasn’t just a bargain that those users had signed up for. It was something bigger than that. They had invested in Dean’s idea. Because he had earned their trust over the years with his contributions to the community. They truly believed in the service’s potential.
Hence, the positioning – “a hosting company run by and for people who love publishing on the web”
In November 2005, TextDrive was acquired by Joyent, a cloud computing company.
Surprisingly, the acquisition didn’t affect lifetime users. Not so surprisingly, Joyent went ahead and replicated the same user-funded model to raise money on number of occasions.
This method, seemed brilliant. Except, of course, it wasn’t.
In 2012, a strategic death knell was cast out for all lifetime subscriptions. As Joyent decided to transition lifetime accounts to a paid plan and the following email was sent out –
TL; DR – We plan to sunset these services.
We’ve been analyzing customer usage of Joyent’s systems and noticed that you are one of the few customers that are still on our early products and have not migrated to our new platform, the Joyent Cloud.
For many business reasons, including infrastructure performance, service quality and manageability, these early products are nearing their End of Life. We plan to sunset these services on October 31, 2012 and we’d like to walk you through a few options.
We understand this might be an inconvenience for you, but we have a plan and options to make this transition as easy as possible. We’ve been developing more functionality on our new cloud infrastructure, the Joyent Cloud, for our customers who care about performance, resiliency and security. Now’s the time to take advantage of all the new capabilities you don’t have today. Everyone that’s moved to our new cloud infrastructure has been pleased with the results.
We appreciate and value you as one of Joyent’s lifetime Shared Hosting customers. As this service is one of our earliest offerings, and has now run its course, your lifetime service will end on October 31, 2012. However, we believe that you will enjoy the new functionalities of the Joyent Cloud. To show you our appreciation, as one of Joyent’s lifetime Shared Hosting customers, we’d like to offer you a free 512MB SmartMachine on the Joyent Cloud for one year. Use this promotional code to redeem the offer.
Please review the Terms and Conditions for the Joyent Cloud One Year Free 512 MB Machine Promotion by visiting this link.
To find out more about the Joyent Cloud and your options, please follow this link to our migration center for additional details.
As it would have been too blunt to say that these accounts had become a liability for the company, The service and support costs had shot up and the management had no choice but to propose this transition.
Customers revolted. Not because they didn’t get enough value out of their investment. They had received a lot more than that. But, a promise was broken. And no one likes that.
Dean Allen, who had left the company in 2007, came back to revive TextDrive and honor the lifetime subscribers.
“I knew fully well at the time that one day it wouldn’t be possible to support lifetime subscriptions anymore, and I knew when the day came that it was no longer possible I would step back in and take care of those people.” Dean’s comment on the situation as shared with GigaOm
The new TextDrive was still hosted on Joyent’s infrastructure but it was operated as a separate company. Once again, things looked positive. Until a few months later, when service issues started to surface frequently. Support requests were ignored, Dean Allen seemingly went AWOL.
It wasn’t long before TextDrive was shut down with the following announcement on the website –
“What began in mid-2012 as an exciting challenge fueled by good intentions and lean resources quickly turned into a cleanup project with almost no resources, It is disappointing to report that after a year and a half of uphill battles and unimagined setbacks, after several costly efforts to regroup and find another way, options to keep TextDrive growing have run out.”
Trust. Community. Good intentions. Everything faltered.
The problem didn’t really qualify for a formidable ordeal. Though, it seems, that’s how it was perceived. Joyent has raised millions from traditional funding sources, it wouldn’t have been difficult for them to come up with a solution.
Startups are fragile. Most don’t survive.
Thus, one could argue that a lifetime plan could never last a lifetime. And that consumers must understand this.
Logical, isn’t it?
But, what about trust? It’s scarce. It’s hard to earn. Isn’t that something that should be factored in, when such decisions are made?
Online or offline, for a service based business, a commitment to a lifetime plan must be accompanied with ominous music that signals the dire consequences. As costs compound over time, there is no way, a one-time charge will suffice for the expenses incurred.
None of this would happen, if both consumers and businesses would look beyond surface benefits. Here are few things to think about before taking the plunge of a lifetime (no pun intended) -
For businesses -
When you’re selling a service, customers cannot run on their own for a day, let alone forever. Before offering lifetime accounts, think about the average life-cycle of a customer and find out whether the upfront charge will cover all the incurred costs or not. Usually, it wouldn’t be a profitable proposition to make and you’d end up deciding against it.
If you’ve already given away a lifetime plan and have started to feel the pain of scaling costs, do not impose an impulsive decision on customers. Instead, be honest, explain the situation, tell them how they’ve benefited from the service till date and what the business is going through. And look for feedback. This way, you’re more likely to find a solution that’s mutually beneficial.
For consumers -
- Even if you sign up for a lifetime account, it’ll help to keep a realistic life cycle in mind. Say a period of 3-5 years, in which you’d be able to use the service with all its promised benefits and accordingly evaluate the amount of money that you’re willing to spend on it as an upfront investment.
Have you used lifetime plans as a part of your acquisition strategy? How did it work for you?
If such a plan is still living its lifetime, how are you getting along?
Have you ever subscribed to a lifetime service that saw an abrupt end?
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