Greetings,

This is a very informal, off-the-cuff survey of some web applications in the Rails ecosystem that have varying payment plans, how they present them, and some of the differences among them.  The idea is not to compare the services, but to start to get a handle on how to price services on the web.

Background

I’m working on launching a small, very niche Rails-based web application in the near future, and am looking to charge a small amount per-month for it.  Mostly as a way to make ends meet while I’m unemployed, but also because I’d like to provide a few extra features to those users who already donate to the free JBidwatcher application, and because the web application uses S3 and I have to defray those costs.  While I’m very grateful my users are contributing because JBidwatcher itself is useful to them, I’d like to offer a ‘premium’ value both for folks who have already donated, and for people who don’t feel comfortable just sending money, and want to see something extra for it.

This led me to be curious about pricing.  I pay for several web applications already, and expect that eventually I’ll have to pay for more if Google starts actually asking for money. :)   I decided to dig into the applications that are out there, and see what kind of pricing models I should be looking at.

From my informal survey, a lot of the subscription plan models used by Rails-oriented companies naturally grew out of 37signals and their fanatic devotion to the concept that web applications should be good enough to charge for, and should be charged for.

The products I’ve looked at for this are Lighthouse, Tender, GitHub, Highrise, Basecamp, Campfire, NewRelic RPM, CrazyEgg, Hoptoad, Thunder Thimble, and Pingdom.  I’m sure there are many others out there, but those are the ones I deal with on a semi-regular basis.  I have paid accounts with GitHub and Pingdom, and have used (at other companies) paid accounts on Hoptoad and NewRelic RPM.

One specific attribute of all of these applications is that they have varying levels of paid accounts, not just a free/paid[/lifetime] like many other services (LiveJournal, Flickr, LibraryThing, to pick a few that I personally use).  I like the spectrum approach as it gives users a choice as to how much services they’ll need, and what the amount they’re willing to pay for it is.

Raw Pricing Plans

First I want to present the ‘raw data’, a link to the plans and a brief table with the plan names and the monthly cost.  Then I’ll point out a few things I found interesting about the data.

Lighthouse*

Gold Silver Bronze
$100 $50 $25
* and a free plan

Tender Support

Basic Plus Premium
$19 $49 $99

Free trial is 30 days only.

GitHub

Open Source Micro Small Medium Large Mega Giga
Free $7 $12 $22 $50 $100 $200

Highrise*

Max Premium Plus Basic Solo
$149 $99 $49 $24 $29
* and a free plan

Basecamp*

Max Premium Plus Basic
$149 $99 $49 $24
* and a free plan

Campfire*

Max Premium Plus Basic
$99 $49 $24 $12
* and a free plan

NewRelic RPM

Lite Bronze Silver Gold
Free $40 $85 $200

CrazyEgg

Pro Plus Standard Basic
$99 $49 $19 $9

Hoptoad

Egg Tadpole Toad Bullfrog
Free $5 $15 $25

Thunder Thimble

Free Trial* Tiny Small Medium Large Extra-Large
Free $9 $19 $39 $79 $119

*Free trial is 30 days only

Pingdom*

Basic Business
$9.95 $39.95
* and a free plan

So what’s interesting here?

Lighthouse, Tender, GitHub, Highrise, Basecamp and Campfire all differentiate on disk space used.

Lighthouse, Tender, GitHub, Highrise, Campfire, Hoptoad and Thunder Thimble all have some variation on the concept of ‘user’ that you can pay more for more of.

In everything except NewRelic and to a lesser extent Hoptoad, all the capabilities of each application are available to all user levels, just at varying quantities.  Feature distinction only exists in those two applications.  In Hoptoads case, the distinction is between free/non-free; if you’re paying, you get all the services.  This leaves NewRelic as the only one that deeply distinguishes between features available to different paid levels.

GitHub, Highrise, Campfire, and Hoptoad all have SSL support as an ‘add-on’ feature; it’s not part of the free accounts, and in some cases it’s not part of the basic level paid accounts either.

Discounts

When I signed up for Pingdom, they sent me a ’70% off the first year’ invitation, which reduced the price to roughly $3/mo. for all the basic plan amenities; presumably under the theory that they will be able to re-subscribe me in a year at full price.

NewRelic is running a 20% off discount currently, which lasts as long as you have a paid account.

Pricing Plan Layout

Historically I seem to recall most of these sites had the table style of comparison chart (still used by NewRelic, Hoptoad, Thunder Thimble, and CrazyEgg), but most have converted to the ‘box’ style of comparisons.  GitHub still has the table when you view the plan chart from your account settings, but other than that Lighthouse, Tender, GitHub, all the 37signals products, and Pingdom are using separate boxes for each plan level.

The 37signals products and Pingdom use an outsized box to emphasize one of the plans, presumably to drive signups to that plan.  CrazyEgg does the same thing within their table style, also.

I kept the order the various products displayed their prices, and it’s noteworthy that all the 37signals products, CrazyEgg and Lighthouse start with the larger plans on the left, and go down from there.

It’s also interesting that all the ones marked as ‘and a free plan’ de-emphasize the free plan by putting it in small text under the large table of paid options.  Two of them, Tender and Thunder Thimble offer a 30 day free trial, but no ongoing free plan.

GitHub and NewRelic are the only ones whose plan details go below the fold.  GitHub’s plan upgrade doesn’t, but their new sign-up plan list does.

Disk Usage

So for the applications which differentiate on disk usage, how much does $50/mo. get you?

Lighthouse Tender GitHub Highrise Basecamp Campfire
2GB 5GB 6GB 10GB 10GB 10GB

This pattern is roughly the same for the $24 price point for all of them. 500MB for Lighthouse and Tender, 2.4GB for GitHub, and 3GB for the 37signals products. This suggests that limiting on disk usage ranges from 20MB-200MB per dollar per month, a pretty wide range. Estimating based on S3 costs suggests a per dollar per month storage amount of around 2.3GB, but that relies on one upload, one download, and ongoing storage. If your usage is asymmetric, or storage is temporary, the S3 based cost can vary a lot.

Users

For the applications which vary pricing based on users, how much does around $24/mo. get you (I chose this number since Hoptoad doesn’t have a $50 price point)?

Lighthouse Tender GitHub Highrise Campfire Hoptoad Thunder Thimble
15 5 10 6 25 32 8

I believe this is a wide range mainly because per-user data is usually relatively light, and so it has more to do with how complex the application’s interaction between users is, rather than a real per-user cost. Still, some numbers do come out of this. The cost/user ranges from $0.78 to $4. At the $50 price point, the cost/user for qualifying apps is $0.82 to $3.27.

Summary

I don’t pretend to know pricing, or sales, but I like to believe that in aggregate the people putting these sites together do.  I see a pretty good argument here for feature parity among price points, but finding quantities that can vary between prices.  There is a clear value to users and disk space used, so those are early things to look at when pricing an application.  SSL support is a common feature of paid plans, and not of free plans.

There’s a definite movement towards boxed plan details, over tabular feature comparisons.  Ongoing free plans still exist in the majority of applications, but are de-emphasized in most, guiding users towards the paid plans.  Overall, the plans are simple, only falling below the fold in two cases, and relatively easily consumable in all.

The lowest payment point plans are $5-40, with a bare majority falling in the $5-12 range, and all the rest but NewRelic falling in the $19-$25 range.

Closing

I hope this has been an interesting and potentially useful survey of a few pricing plans for applications generally in the Rails ecosystem.  Any mistakes are mine, and I’d very much like to hear about them so I can fix them.  Other data points are welcome, and points I might have missed that would be valuable to folks thinking about pricing are welcome, and even encouraged!

I did this for my own edification, but I’d also very much like to know if others find it interesting!

Best of luck, and may figuring out pricing not be as much of a pain for you as it is for me!

–  Morgan Schweers, CyberFOX!


8 Comments »

  1. On Tony Wright Says:

    Interesting stuff! In general, I think geeks are pretty unsophisticated about segmenting (I am throwing stones from a very glass house, here!). At the end of the day, everyone is trying to get people who can afford it to pay more. None of these vendors really incur much incremental cost from disk space usage or additional users. There are lots of ways to segment that I don’t think many are taking advantage of… Coupon codes (pingdom!), loyalty plans, maintenance add-ons, setup costs for larger teams, etc.

    I think the only way to really nail down pricing is to A/B test it– which for small vendors with lower traffic is pretty time consuming. Present a page with a price and a buy button. Measure CTR. Adjust price. Repeat.

    In general (especially when selling to businesses), I think people overestimate cost-sensitivity… The scarcest resource for a business is generally time and the difference between $10/mo and $200/mo is virtually nothing.


  2. On Mark Menard Says:

    Thanks for the work. I’m also launching a SaaS offering and pricing has been a major issue.

    Also, and I know you didn’t solicit this, part-time start-ups are fraught with a lot of risk. I wish you luck with it, but be sure you can close it up with no long term financial obligations.


  3. On Cyberfox Says:

    Greetings,

    I’m also launching a SaaS offering and pricing has been a major issue.

    It’s really one of the surprisingly difficult things; something that most people just don’t think about, but turns out to be freaky hard.

    Tony’s got a good point, though. If you’re targetting businesses, they often won’t balk at what we might consider steep prices. If you’re targeting consumers, like I am, then they’re much more price conscious IMO. Many of the companies I profiled target a mix of consumer users and business users, and that makes for a more difficult mix. It reminds me of the first company I worked for, though, who offered their application free for personal use, but companies, agencies, and institutions had to get a site license. (The application didn’t have any way of checking, it just put up a message to that effect.) They were making more than $25 million/year by the time I left. And had gone public. :)

    part-time start-ups are fraught with a lot of risk

    I know that’s generally true. For me, right now, it’s less so. I’m unemployed, so it’s not really ‘part time’, and it’s a niche of a niche, so nobody is going to be beating down my door to give me money that I’ll have to think about how to repay. I’m very debt-averse, and always have been, but that’s not a risk for me right now.

    The obligations I will have are to my users. I don’t want to disappoint them; my last desktop version has over 80,000 downloads. Getting .5% of those as users of the web app would still mean 400 users, and that leaves me in a form of ‘debt’ to them. My biggest fear (with regards to spinning up this application) is that I won’t be able to keep it up, and I’ll have to wind it down and disappoint those users.

    This is not me trying to change the world. This is me trying to learn what it means to do everything; ‘sales’, seo, marketing, billing, accounting, product management, development, UI, UX, front-end, middle-tier, back-end, and support. For the last 20+ years I’ve been focusing on the software development (middle and back) tiers (and doing support for my own app). I’ve dabbled in the other parts, but never seriously trying to push a money-making product out the door by myself.

    This way, when I do want to change the world, or even help someone else change the world again, I’ll be even more ready. ;)

    Seriously, though, I appreciate the warning. It’s a good thing for folks to keep in mind. Try very hard to avoid incurring debts that will last if the business fails.

    – Morgan Schweers, CyberFOX!


  4. On Cyberfox Says:

    Greetings,

    Tony Wright: I think geeks are pretty unsophisticated about segmenting

    I agree strongly. We (geeks) default to looking for areas in the code that can be tuned to enforce segmenting. When I worked for McAfee Associates, we didn’t impose any code limits, we just…asked how many machines they had when they called, and quoted them a price based on that. We also gave the program away for free, with a little message that said that companies, government agencies and educational institutions were required to site-license the application. Made millions…

    Coupon codes (pingdom!)

    Pingdom totally bought my business with the 70% off thing. They carefully didn’t say if it would last until the end of the 30 day trial period, and so I felt pressure to sign up. Plus, it was a low cost of entry, and a tool that was useful to me. I was very impressed by the sales process, and it was entirely scalable as it was zero-touch.

    Affiliate marketing (get someone else to sign up and pay for 2 months, you both get a free month) works nicely (see: ServerBeach, whom I recently upgraded my server with), also.

    As for A/B testing…I don’t know. I heard recently that NewRelic RPM had signed up their 2000th customer recently. While that’s good money, that’s not a good sample set for A/B testing pricing. Plus, as Amazon learned, when you test pricing like that, folks tend to talk…and you can get bad publicity.

    You’re very right about the cost sensitivity of businesses, though. Everything in my experience shows that if you’re selling into companies (and they want what you’ve got) there’s two segments: ‘everything under $500′ (where ‘$500′ is fungible depending on your field), and ‘we need authorization for that’. (If they already REALLY want it, authorization is easy.) Business pricing is probably easier, but may end up being higher touch, the higher the price goes. My current stuff is more targeting individual users, who are very sensitive to cost, though. Thus the analysis of the companies above who are…mostly targeting individuals in the pricing levels I looked at, if not the broader category of ‘consumers’.

    I feel like I should come up with a pricing strategy that feels fundamentally fair, and then shift all the service levels up one notch in cost. :)

    – Morgan Schweers, CyberFOX!


  5. On Brian Says:

    Thanks for this information. We are also working on pricing for our SaaS product. Our clients will be businesses (Universities to start). The big part missing from from your analysis is that it does not have any data on the actual functional value of the different services. I am not familiar with a number of these websites, so I wonder if there is some metric that can measure SaaS pricing compared to the scope and utility of functionality that it is buying. We are having a hard time finding a similar service to help set a value for our service (this, I guess, is agood thing for competition). We have attempted to do some analysis on what the cost would be to our clients to perform the same service without our software, but this is a difficult analysis. Ultimately, I keep coming back to what seems “fair”, and what would I consider paying for it myself. I do think this tends to undervalue the product, though. If anybody has some thoughts, check out our website demo at http://www.datacookbook.com and send us soem pricing ideas. I would be happy to do the same. (Note: The software is scheduled to be released in November)


  6. On Gary Mart Says:

    “while I’m unemployed”; perhaps if it were easier to get in touch with you (I was unable to find a phone number for you) this would not be the case. Anyway, I have an interesting project for which you may be a good fit. Please contact me.


  7. On Cyberfox Says:

    Greetings,
    While my phone number is (thankfully) somewhat hard to find (it’s on the WHOIS record for this domain though :( ), my email address is pretty easy.

    I have to admit I’m always curious about interesting projects; I have since found a good position, however. The post was in July, and I started work at the end of September.

    If you want to talk about your interesting project, feel free to email me at gmail.com. ‘cyberfox’ is the user name. If I can’t help you, maybe I can point you to some other resources.

    – Morgan Schweers, CyberFOX!


  8. On Bruce Denney Says:

    I think that the charges should be based on two criteria “the amount the software is used”, “the value of its functionality” and “the amount of resources needed to run it”

    The objective is to create a financial structure that mirrors reality. If you code a very useful premium function that is barely used you might earn the same as from a very basic function that is used a huge amount.

    This is in itself an application, a micro billing platform that allows users to pay for what they use.


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