Comment by ryanwaggoner | Hacker News Reader

Comment by ryanwaggoner | Hacker News Reader

Looks interesting, but 10% is really steep to me.

That’s just going to heavily incentivize your most successful users to bail. I run a five figure paid email service and I’m using a membership management service that charges flat fee plus 2%, and it annoys me every month. I’ll be replacing them this year. Membership billing plus a synced email list on Mailchimp is really commodity at this point. Doesn’t make any sense to pay a percentage of revenue.

If it was 10%, I’d replace them this week.

I may get pushback because there’s a contingent of people on here who basically seem to think that ever worrying about price for software and services is the wrong move. I think that’s pretty stupid when you’re a small company. It’s stupidly easy for a lot of small companies who are paying hundreds or thousands per month in recurring subscriptions to shave 20-30% off. If you’re a solo founder, that’s a huge increase in your personal bottom line.

EDIT: I'm probably coming across as too negative here, so let me add a few thoughts:

1. You built something useful, launched it, and have paying customers. That's HUGE and puts you ahead of 99% of "startups" so congrats :)

2. I strongly believe in the power of paid publishing and email marketing (it drives almost 100% of my income these days), and I think more cool tools and platforms in this space is excellent. This is the kind of thing that I would use.

My only real issue is just that I think what you're doing with the pricing model is shooting yourself in the foot (since it incentivizes people to switch away) AND it's unfair to users (since switching away is REALLY hard, and you probably know that and are counting on it to some extent).

Maybe charge flat + fee up to a cap? It'd be really comforting to know that I'd never pay more than $495 / month for this or something, and that would only be once I hit $10k / month in revenue or whatever.

You're also (I presume) an engineer. Most writers don't have the skills to build something like this.

One way to look at it is "I'm losing 10%". Another way is "I'm now making 90% I couldn't have otherwise made."

True, and we hope that if we do a good enough job we can provide more value for the 10% than you get by switching even as you grow.

We’ve seen writers doing this report that they spend up to 40% of their time messing around with the platform - if we can improve on that by a chunk and let them focus on writing it adds up!

I'm positive that that's true when you're making $1k / month. When you're making $10k or $20k or $50k per month? No way.

There is no way that it's a better use of your time and money to pay thousands of dollars per month vs. just switching to a flat rate provider. You're not providing much more value for someone making $10k / month vs. someone making $1k / month (the email sending costs here are super negligible), so why am I paying 10x as much?

So again, it's just an incentive to switch as soon as you start making real money.

I agree with you.

I just think it’s the right challenge for us to solve for: how do we continue to deliver that much value (or as much as possible) vs. being the lowest cost option for email + payments + website.

Have you considered charging 20%? Think of the value you'd be forced to provide! :)

In all seriousness, this is a good attitude to have, except that switching from you guys to someone else is going to be genuinely painful. The provider I use now has an API and provides full CSV and JSON exports of everything, and then all the actual payments live in Stripe. Switching should be a snap, right?

But it's still a pain to migrate over the user accounts, force users to reset their logins, setup new subscriptions with the same different billing amounts (prices have changed over time), discount codes, and billing dates, ensure that everything continues smoothly so I keep getting my money, switch over all the integration points with my site and analytics, etc, etc, etc.

It's such a pain to switch that many just won't bother to pay that big upfront cost in order to save money every month going forward and will just put it off, which is why I find this pricing model to be particularly aggravating. They wouldn't have signed up for it in the first place had they known, but they didn't know and now they're "trapped".

I hope you're just underestimating the difficult of switching away and not counting on it!

You don't have to build this. There are tons of membership management plugins and platforms out there, pretty much all integrate with Stripe, and most of them will keep a mailchimp list in sync so you can easily send emails to just your paying members.

EDIT: I also hate the logic of "meh, fees don't matter, my revenue would be zero otherwise!!" It's not true (you have other cheaper alternatives), but even if it was, doesn't that mean you should be fine paying 99% in fees to platforms and credit cards and whoever else? After all, 1% is better than 0%!!!"

You can also download an install an IRC server or Jabber server to run corporate chat, yet tech companies happily use the paid version of Slack. Not managing the thing you aren’t good at or interested in doing is the value prop.

You’re absolutely right. But how many of those services charge 10% of revenue? Zero.

And if 10% of revenue uncapped isn’t too much “because not interested”, why not 20% or 50%?

You’re obviously welcome to pay 10%, I just think it’s foolish once revenue hits a certain point.

Edit: think of it this way: you already have $20k per month of paid newsletter revenue and you need a new membership billing provider. Other options are $20 - 100 per month and won’t go up any more. Would you even consider one with the same or fewer features that’s $2000 per month (and will take 10% of every marginal dollar from there)? I really doubt it. I love sleek, simple, elegant tools, but I won’t pay any price for them.

> But how many of those services charge 10% of revenue? Zero.

I am not discounting the points you've made. I understand that there are definitely cases where 10% might be too high. Hell, it might even be applicable here.

Respectively, I disagree with your quoted comment. Are you sure its zero? Uber Rush delivery drivers make 75-80%. Where do you think the rest of the delivery fee goes? This was just from my first Google. I am sure you can find more examples of this being not the case.

Going back to the topic at hand. For a dev like me, I think 10% is high but agree with the points made. There are 100s of posts online of people writing shit for free. I am sure you can even find a dozen of subreddits alone for writing. From their POV this can be seen as a secondary source of income.

Most people who are GOOD writers - at a point where anyone would buy their 'product - have been writing for many years. They could even be doing this as a profession (think book writers). For them, do also see 10% being a high fee?

--

> I just think it’s foolish once revenue hits a certain point.

including your edit are home run!

Uber Rush delivery, the App Store, and other similar platforms are different because they're providing the platform, and more importantly, they're often bringing you the customer. It's much more reasonable to pay a fee that's a percentage of revenue in that case. I was responding to the person who suggested that Slack charging for chat was analogous to what Substack is doing.

There's actually a pretty interesting behavioral economics point to be made here. From a purely rational standpoint, you would choose to make 1% over 0%, because it's 1% more than you otherwise would have made. In practice, humans have a "fuck you" threshold above which they feel taken advantage of and refuse to cooperate. Check out the idealized economics experiment version of this which is called the Ultimatum Game: https://en.wikipedia.org/wiki/Ultimatum_game

I do find this super interesting as a pure behavioral economics question, but this situation is a bit more complicated. There's actual work to be done for this revenue, other costs you have to manage, opportunity costs for any capital you have invested, and the risk that you'll actually make enough at the end of the day for it to be worth it :)

> There are tons of membership management plugins and platforms out there, pretty much all integrate with Stripe, and most of them will keep a mailchimp list in sync

Which membership management would you recommend?

I got your point from the beginning, and your other comments have made it clearer on why customers could get upset with this percentage cut. The way I see it, a lot of it is basic human psychology.

That said, I wonder what YC is bringing to the table here, since this is marked as YC W18. Shouldn't there be some experienced people advising on pricing and such while a venture is being launched? From the OP's responses, it seems like YC wasn't involved. Or it's highly likely that I don't understand the significance of YC W18 here.

I'm wondering since you mentioned it.

When does it make sense that the 2% is worth it? Or is it in your eyes, that there should never be an extra fee?

Have you thought about it from the other perspective? That they are giving you the cheaper price at a cost to themselves, hedging the bet that the 2% will make them whole?

> service that charges flat fee plus 2%

The 2% is for card charges. The service charges a flat fee, probably tiered based on audience size (delivery requirements).

Nope, that's on top of Stripe fees.

The 2% is worth it when the revenue base is small, but increasingly less so. When I hit $10k / month I'll be paying this provider $200 / month for something that I can get for $200 - 300 per year from other providers. And it won't just keep going up as I make more.

And yeah, maybe the loss leader thing is their pricing strategy, but it's about to cost them a customer and I doubt I'm the only one.

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