Comment by tptacek | Hacker News Reader

Comment by tptacek | Hacker News Reader

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That only makes his pricing model worse, not better. He's doing $3/user (ie: not enough) and managing to chase off serious users by forcing them to think carefully about the pricing.

Here is a hint, Colin: any time a prospect says he's "run the numbers" on your pricing, you just received a strong signal that you need to simplify pricing. Purchasing decisions should be made in the limbic system.

Think about it: if you charged $5/mo and put an obscenely high cap on storage for the $5/mo account, then by your own math you'd be hugely improving your revenue, and at the same time you'd be charging half of this original poster's pain threshold number --- which is referring not to crazy encrypted backup solutions but to things like to-do lists!

At EnterAct, the ISP I ran tech-ops for, my old boss Mike Cloran came up with what he called the "5/30" pricing scheme, which we used to great effect to grab customers from other ISPs. Other ISPs were either metered (which scared the shit out subscribers) or flat-rate (which chased away light-users). The 5/30 plan was: $5/mo + $1/hour, capped at $30.

This is actually not a great deal and it is not particularly sophisticated (it is... wait for it... a capped metered plan). But it simplified the buying decision for people, addressed their perceived risks, and made EnterAct seem even more flexible than it already was.

Pricing is the hardest part of product marketing. There's a reason why established companies don't let just anyone do it. Your pricing scheme punts on it.

Think about it: if you charged $5/mo and put an obscenely high cap on storage for the $5/mo account, then by your own math you'd be hugely improving your revenue [...]

... and also hugely increasing my costs. With all due respect, I've talked to a lot more Tarsnap users than you have, Thomas, and I also have the advantage of seeing how much data people upload and how much they delete.

Your suggested pricing model would result in people uploading far more data and never deleting any of it, and would very rapidly move Tarsnap from "profitable" to "bankrupt".

Then lower the cap. Or do what Mozy does, and charge $5/mo + $1/mo/g (they charge 0.50/mo/gig, but with no Tarsnap sauce).

If Mozy can charge 0.50/mo/gig, 0.30/mo/gig is way too cheap.

I think a big part of the reason underlying why I can't afford it is that it uses amazon for the storage, and that is already quite a fee for large amounts of data even before the tarsnap markup.

The security is of lesser consideration for me, the convenience was the main selling point.

Congratulations, Colin. Your pricing model has people thinking about your service in terms of "a markup over Amazon S3". =)

I'm sure you think me crazy, but that's what I was aiming for. I want people to be able to say, like _delirium and wwortiz did, "this is clearly a reasonable price because he's using S3 for backing storage and we know how much S3 costs".

A critical part of trust is transparency, and in the long term I think I'll do better by having transparent and obviously reasonable pricing than by obscuring things and trying to maximize my (short-term) profits.

Exactly what does your cost of storage have to do with the value of the service you provide?

It doesn't. But people aren't rational -- they'll reject a good deal (including free money!) if they think the person offering the deal is making out better than they are.

I think you guys are just looking at value differently.

I didn't know about either of your companies but by the discussion, its clearly possible for Tarsnap users to derive value from the trust associated with transparency and feeling like their dollar is maximized. tptacek, pricing schemes aren't the only component of the purchase decision or profitability. His users are making a more emotional decision. cperciva should stick to the core of what his users are finding valuable...then get bought out and turn into an evil profit maximizing company

Personally I think of it as a value added markup as a good thing.

Using S3 would cost me more per month unless I implemented a similar system to tarsnap.

Seeing how Amazon's whole business model is basically to commoditize storage (and cycles and database queries) and drive prices as low as possible, their price per gigabyte seems like a very dangerous star for Colin to hitch his wagon to.

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