Disclaimer: I’m the CEO of Licensario, a company who targets to build the ultimate solution for monetizing your application. The following cases are examples to where there is a need of finding a source of revenue. I wrote this post after attending a great meetup in order to start a discussion which companies in the same situation could learn from. This is not by any chance an attempt to market Licensario.
A few days ago I heard the CEOs of Viber and Soluto – 2 of the most promising Israeli startups – speak about their companies and how they got from 0 to millions of users. I put millions of users in bold in purpose. Not because it’s surprising that such products are used by millions. That’s not surprising at all. I think they got excellent products and great people are working on those products. It gets just one glance at Soluto’s UX to understand that you want their creative department to work for you. The thing that amazes me the most is what these 2 companies share. Them and many other companies. Millions of users and no income. Zero. None. How can it be? How can such successful companies with brilliant people, millions of users (active users), VCs backing them are not making any money? Can we even call them successful if they’re not making any money? Can a company with no clear notion on how it’s going to make money should even exist? Should a company exist if the only revenue they can see in the future is an exit?
I know that some readers might raise an eyebrow at this point. They will definitely start quoting all the experts they read that said that in the beginning you shouldn’t worry too much about how your product will make money. I partially agree. I won’t get into why I don’t totally agree. This deserves a whole post. I’ll just say that businesses purpose is making money. More raised eyebrows here for sure. Let’s just say I’m in the entrepreneurship business in order to change the world like any other entrepreneur but a business, as an entity, should make money. Anyway, I’m not talking about starting companies. I’m talking about established companies. With millions of users.
When these companies were asked the difficult question “how on earth are you going to make money?” the audience got answers like “sell extra features, charge enterprises for our service etc.”. What can I say, I wasn’t too pleased with the answers. I don’t know if I could give better answers but I do have some suggestions.
Let’s take Viber for a second. Viber offers free calls and text messaging. From what their CEO Talmon Marco told the audience they have 45M active users. Amazing number. I think that Viber exists 2 years. So, 45M active users after 2 years. Clearly a number every entrepreneur will love to see after 2 years of operation. It means they have a great product. A lot of people love it and remember to use it every month. I’ve got a revolutionary suggestion. Start taking money for your app. I know it’s a big risk but let’s imagine for a second. Let’s say Viber will charge 10 cents for their app. Even for their existing users. No doubt, some people will stop using their app. Let’s say they’ll lose half of their users. this leaves them with 22.5M users which turns out to be $2.5M coming into the company. It sounds better than $0 but there is still a problem with that model. Viber wants a monthly revenue stream. What if Viber charged their users 10 cents per month? The immediate conclusion one makes out of this kind of decision is that they will lose a lot of users. How many? 80% of their users? 90% of their users? All of them? Viber was able to engage millions of users to use the app every month so it’s reasonable to assume they will stay with at least 10% of their users. This means 4.5M active users, $450K per month, $5.4M per year. I think that’s better than not making money at all. Another thing that might be reasonable to consider is that for a user to use Viber depends on if her friends are using it. So, if most of her friends were willing to give it a try the first month (it’s only 10 cents per month!) she will also give it a try. And if her friends are using it, their friends’ friends are using it and so on.
Surprisingly, my suggestion for Soluto is the same. Charge for your service. Why charge only enterprises? Soluto got a great product with an amazing user experience. With Soluto it’s easy for you to be the only geek around (or virtually around) that knows about computers and how to fix them. Soluto’s CEO Tomer Dvir’s answer to how are they going to make money is that if you have up to 5 computers you help to in your network it’s free because it means you are a personal user. If you have more than 5 then it’s a company and they will charge for it. Why not charge personal users as well? What if Soluto decided that if someone wants remote access to her computer for fixing purposes she needs to pay 1$? I bet that most of the people will pay. Why not, it’s much cheaper than calling a technician. They can even start a network of Soluto technicians that people will give access in order to fix their computers. Some of the money that the ones getting the help payed will go to the Soluto technician that helped and some to Soluto (30%, 70% is popular these days…).
Why do companies are so afraid charging for their products? Is it technological difficulties with dealing with charging users and offering them flexible pricing? Is it because people got used to free stuff when it comes to software? Is it piracy that became easier to people than paying? Are they afraid all their users will stop using their product? Maybe it’s because the paying process really pisses users off (Apple did a great job easing this issue)?
I don’t have a clear answer for this question yet and I’ll be happy to hear what you think. Maybe the poll below will help…
Update (October 13th, 2013): I closed the poll. Following are the results. You can also view them in the following link as a chart: https://app.slik.io/charts/chart_ee004e2d518b36bc1cfa. Soon I’ll write a blog post about the results and about the funny answers I got as ‘other’…