Raising Prices Is Hard | Hacker News Reader

Raising Prices Is Hard

backblaze.com

353 pointssoheilpro157 comments

I’ll possibly be going against the grain, but they have really made a fanfare about this one. I’m a subscriber and I remember the email coming though and it felt a little too over-sensitive to me. You’re putting the prices up by a dollar a month, you’ve been losing out in real terms because of inflation for years, and I already have gigabytes upon gigabytes of data stored with you. I’m not moving for an extra $12 - and even then I was too lazy to take the promotion because it’s a business expense and having to process the additional invoice didn’t feel worth the bother. But I’ll admit that one is a more of a reflection of me than Backblaze.

I understand you’d be worried about a price increase but the email, promotion, two years of lead up time, and now the blog post comes across and a little too apologetic, perhaps. Just stick the prices up by a dollar and give me a quick “sorry guys, we’ve not raised them in a decade - we need to stay competitive” and I wouldn’t have even remembered it.

Yev from Backblaze here -> Jack that's interesting insight, thanks! What's funny is that I was the main driver internally for tone and the process as a whole. We definitely had some intense conversations about the "band-aid" approach where we'd announce and raise shortly thereafter, and the approach we took which was a bit more measured. In the end, I think we spent a lot of time making sure that we were taking care of the customers, but you're right, our tone in certain communications did come off as a bit apologetic.

The truth is we'd never done it before, so we weren't really sure what the reaction would have been - so we erred on the side of caution. Now that we have data points, if we ever need to do this again we'd likely still take an open, honest, but maybe more blunt approach. Tough to say though because I try to default to default to empathy, which means my takes are usually softer. Those conversations are some that didn't quite make it to the blog post, but finding the right balance for us was an interesting process!

This is new to me too, so I can’t take any expert high-ground here as I’ve never had to do one either. From that perspective I’m glad that you wrote the blog post as I’ve learned a few things from it.

But as a customer I can say that you have a really good reliable service, and one that I’ve shopped around for. You’re effectively my only point of failure for personal artefacts and one of only a couple for anything work related. I do implicitly have an immense amount of trust in your product and let’s be honest, you aren’t charging all that much for it.

This is to say if you were to take the more direct and blunt approach next time I absolutely wouldn’t hold it against you - in fact I’d say you don’t need to devote so much sweat into something that is just another fact of life. Costs go up, I’ll get over it, so don’t worry more than you need to.

I can tell your heart is in the right place though which gives me confidence and thanks for your response too!

Fundamentally, your customers want you to make money because when you do, you stay in business and stay happy, healthy, and able to hire great people and innovate.

Please don't apologize (much) or be timid about applying changes that protect the service, customer experience, and business as a whole.

There is a sizable contingent of customers who don't care if you make money and want bottom barrel prices or are just around for promos. This group can often be quite demanding without any real justification for being as such.

I don't know about you but I'd prefer that the company that's keeping all my data backed up stays in business and if that means paying an extra dollar a month, then so be it.

The famous ten times customers. They demand ten times more attention and want only to pay a tenth of the price. Raise the price and get rid of them. Rather have 1 customer who pays 10 times the price then 10 and 9 complaining and bitching..

So let them go and be a drain on your competitors. Those are not the customers you want.

Unfortunately, in today’s world and even right here on HN, the emphasis on growth and valuation and ignoring profitability. I’m glad to see any company whose business model is to charge enough for a product to (hopefully) be profitable.

Yev here -> we HAVE to be cash-flow positive since we're not VC-funded. When we started the company it was bootstrapped, so "making enough money to survive" has always been a part of the equation!

That's good to hear...

But that means you are an unhip "lifestyle business" and obviously if you're profitable, you must be doing something wrong. How do you ever expect to have an enormous exit and make your investors rich?

Yev here -> Ah, that's a very good question. Staying in business > being hip in most cases ;-) The nice thing about being bootstrapped is that we don't have that many investors, and they're chill with just seeing how this goes. We actually do have on "traditional VC" that invested, but they are very relaxed about the whole thing and don't have a board seat, just an observer role - so they're like, if you eventually are profitable enough, just pay us back at some multiplayer and we're good - otherwise we'll wait for an exit. Nice folks! :D

I was really being facetious toward the startup culture and praising BackBlaze. I didn’t expect a serious response...

But your response was quite informative. Backblaze is one of the few smaller tech companies I admire from a business side along with Fog Creek, JetBrains and Base Camp.

FogCreek sold a while back and is run by an outsourcing firm: https://www.fogbugz.com/About-Us and background: https://www.think3.com/about

(I only noticed it a few weeks ago when I was surprised to see their address was Austin, TX)

Theoretcally, that's 100% true.

Realistically, a large pool of users don't think about the long-term viability of a business (all they want is the world for $22 per month).

That's quite a bit for this world. How about $1 for a nice island?

When Google’s GSuite moved from 5 bucks to 6 bucks they just sent an email and it took affect the next month.

Being confident in the value you offer and raising prices without groveling shows confidence. I stayed with gsuite and disk time think anything of it.

You guys offer a great service. Don’t be afraid to charge fair prices.

The big thing that sets you apart is how open you are about stuff like this. Don’t feel bad for doing it like this!

I'd agree with Jack as well, prices do go up,I don't know that you need to fret so much over it (though certainly it's better than just chucking out out there, which is what 90% of companies do, accompanied by some thin BS justifying it that doesn't ring true).

But that said, Backblaze clearly has a strong culture of communication and engagement work their customers, and that really is the path to success. So if being overly sensitive about price increases is an unavoidable aspect of that culture - then keep doing what you're doing.

Prices do go up. But not usually when it comes to storage and hosting. Those prices do tend to fall.

As a counter example, see all the people who complain every time Netflix raises prices.

Looking at the kind of kick back services like Netflix get I can see why you would want to be so sensitive. In my opinion, empathy is a good approach. Business customers will understand with a brief but direct communication but some home users might respond better to empathy. I’m sure there is a balance to be found there somewhere.

FYI, the price needs to be updated in the text of this page: https://help.backblaze.com/hc/en-us/articles/217665398-Backi...

Yev here - wow, good eye! I'll get it fixed! *Edit -> interestingly, that $5 is there to make a point and isn't really talking about prices, but I changed the text to say "for one license" - which still works. Good catch!

>because it’s a business expense

This here is the reason. For you and I, this is not an issue but some people can be extra ordinarily sensitive to the prices. And even if most of the customer base is fine with it, some will be quite vocal on the internet and one media house needs to run with it and Backblaze will find itself in a PR nightmare.

Though I agree that they unnecessarily wore their heart on their sleeves.

A coupe months ago, Basecamp went down and their blog post was profusely apologetic (almost as dramatic as Backblaze's blog here). People pretty much told them to shut up in the comments and carry on with their work.

That's the thing, this price increase flies in the business world. Not necessarily in the consumer world.

It’s getting late my time so excuse the brief response; it’s a business expense in the sense that I’m effectively a sole trader, so I bear as much of the cost as if it wasn’t a business expense. Rather than it being paid by a multinational corporate and having to chase down someone from accounting I’ve never met.

Laziness (and liability, to a certain extent) is that I’m responsible for keeping accurate records and invoices for all my business expenses for 6 years and if I’m not in the right mood to take that on sometimes it just doesn’t quite hit the value threshold for me to process

But I appreciate your points and it might factor into my mentality.

Or just follow Amy Hoy's advice[0] and only raise the price for new customers. They probably could have bumped their prices by more than $1/month (and sooner) if they had taken that approach.

[0] https://stackingthebricks.com/one-weird-trick-to-raising-you...

You and I feel that way, but there are a LOT of people who are extremely price sensitive, especially in a world accustomed to race-to-the-bottom app pricing. When we adjust our app price, or have a sale, we can really notice it in reactions in our support in-box.

You likely have more experience in that regard than I do so I’ll take that on board, but to frame my point in a more semi-positive light; I feel enough goodwill to backblaze that embarking on a 6 month project with some of your most senior engineers to deliver a credits system just to soften the blow of a price increase, in a market without a clear competitor feels like overkill. You don’t need to do all this for my dollar a month!

I do actually trust them enough to not screw me over, their price increase history alone showed me that.

Sometimes the quick and forgettable slap to the face is more pleasant than the long drawn out apology - although as you mentioned from your experience, maybe I’m in the minority.

No, you are correct, a minor price increase like this after a long period of stability is a blip for most customers.

Yev again -> thank you for the trust :)

Out of curiosity, is it angry complaints along with cancellations, or just angry complaints? Customer feelings matters, but that momentarily "I hate this change wargarbl!" is generally trumped by having a solid, useful service that is competitively priced (even in the face of increase).

Important to point out that the fact that some people are disagreeable people is not your fault.

this is why you do market segmentation - for the folks who buy storage requiring weekend overnight stay you do all the belly dance with apologies around 10c price increase, for the other folks, ie. the ones paying from corp account for the backups with FIPS140 certified encryption applied - just a 30 day notification of 2x price increase with 3pt size font deep at the bottom of that fat corporate bill.

Fair point, but I see it simply as an intentional decision to operate a business in this manner. Proceeding with care, deciding up front how to evaluate a change, execute the plan, and post-mortem analysis.

Test-driven development of business operations.

Agree, you either grab more market share to grow or when that slows, you raise prices like any good SaaS does. The worst thing is going bankrupt and wholly inconveniencing paying customers because you weren’t making a profit.

I don't know. In my mind I consider backblaze to be a competitor to S3. Has S3 ever raised prices? It's honestly hard to imagine S3 ever raising prices (not that they couldn't, just that they have made it part of their marketing identity that they lower prices over time).

I think this will affect how people compare S3 to backblaze in the future.

A backup service offering "unlimited" storage for a flat rate is not the same as a "bucket" of storage where you pay for exactly what you use plus data transfers out. To be profitable, Backblaze's flat price needs to cover their costs which are not only affected by storage hardware per GB getting cheaper but also average amount of storage customers use increasing. As Yet wrote in the post, "we had spent years enhancing the service and making it easier for people to store more and more data with us, thereby increasing our costs."

S3 has gotten a lot cheaper over time; in 2010, it was $0.15 per GB and today it's $0.023 per GB (Standard S3 in US East). Data transfer costs haven't changed as much but have gone down over time. At today's rate, $6 gets you ~260GB of S3 storage but file versioning will cost you more, restores will cost you more, and you'll have to supply your own backup software. Backblaze for desktop backups is not for everyone but I'd say it is for a lot more people than using an S3 bucket for desktop backups.

Backblaze is not a competitor to S3. S3 is meant for object storage that is easily accessible and it definitely doesn’t give you unlimited storage for $6 month.

And if you want to get a copy of your backup shipped to you from AWS, it’s a lot more expensive and convoluted to get a snowball prepared and shipped than the free service that Backblaze offers.

If you need an S3 like service though, Backblaze offers B2 which is much cheaper - and less redundant.

Backblaze is a complete backup solution. S3, well, isn’t. No non-techie would consider S3 to substitute for Backblaze. For that matter, no techie who values her time would consider it a substitute either.

Yev here -> Interesting! This price increase was for our computer backup service, not B2 Cloud Storage which does compete with S3. To my knowledge most cloud storage doesn't get more expensive as time goes on. We've had one competitor in the cloud storage space who did raise prices, but typically that trends down (we've decreased our download fees for B2).

Interesting to think about that perception though, I didn't consider that aspect of it!

When measured in dollars for all the data you have (what Backblaze sells), S3’s price goes up every time you create a file.

Agree with this. You’d think they were putting them up 50% or something.

My local council did that with parking fees a year ago. They didn’t tell anyone or say sorry and everyone just sucked it up. But then I can’t cancel my local council account.

If it wasn't for this blog post, I'm not sure I'd know right now how much I'm paying for Backblaze, and it's very possible I will forget by my renewal date.

> and I wouldn’t have even remembered it.

that's the point.

"Need to stay competitive"?

Disk prices per byte are decreasing. Bulk bandwidth prices are decreasing. Prices should be going down, not up.

Yev here -> Interestingly, they aren't decreasing as quickly as they once were and that was part of the impetus for the increase. I touch on it in the article and we go further in detail in the original announcement, but it used to be that the data growth of the customer was more or less negated by drive capacity increasing and cost per gigabyte going down - but that trend has stymied recently.

Price per byte doesn’t really matter for an unlimited service. As that cost goes down, your users will have more and more data to store, in an amount that will basically cancel out.

Sounds like an argument against running an "unlimited" service.

Having a successful business for a decade and raising prices once in the smallest marketable unit of currency, sounds like an argument for doing exactly what they are doing with their "unlimited" service.

How so?

SSD/HD ratio likely went up. Backing up a laptop ten years ago with 128GB SSD wasn't as hard a job as backing up 1TB SSD, which is now rather cheap.

Yes it came across as melodramatic.

It was a bit like a Stack Exchange blog, wasn't it. They weren't keeping up with inflation. That's not even a price increase in real terms - they should probably do what (UK, at least) mobile networks do and just increase the prices by the official rate of inflation each April - that would let them defer actual price increases for longer.

> you’ve been losing out in real terms because of inflation for years

This is inaccurate. If you break down inflation into its constituents electronics, storage, transfers and cpu have gone down dramatically. An increase of 5 to 6 is 20%, which is far more than 10 years of inflation, even if you account for it being averaged.

I don't know how I can read this as anything but spin. Good on ya guys for increasing prices but don't give it out as spin.

That's only a small part of the picture.

The amount of storage each customer occupies has probably gone up considerably in the same time frame. I know my HD size (and backup usage) has quadrupled over 10 years.

And don't forget that the cost of salaries, rents, electricity, professional services, marketing and well, pretty much everything aside from bandwidth and hardware have gone up. In some cases rather dramatically.

You may have overlooked or forgotten that Backblaze charges a flat rate per client device, not per gigabyte stored or transferred.

And if the data stored by users has grown significantly in that time? I know the amount they store for me would've at least doubled since I started as a customer: core laptop drive, then I have 3-4 externals I regularly connect.

I love the detailed writeup, but it seems like they made this a lot harder than it needs to be.

Most SaaS companies, when they raise prices, will announce that new customers will pay the new price starting in X days, where X is usually 30 or 60. This gives people on the fence a chance to jump on board at the lower price, and lets current customers keep their pricing.

Then they tell their current customers that their existing price will be grandfathered in for X months. If you make X big enough, most people don't really notice, because when you announce it, it seems far away, and when it happens, they probably don't even check their subscriptions that often.

The whole credit thing felt like a ploy to raise some immediate cash and create artificial lock in, and after this post, it seems like it didn't even really help them all that much.

I found their approach refreshing open, especially when you compare it to cPanel's recent price hike debacle. That was a good example of how not to do it,

Agree 100%:

- Announce price increase for new users to existing customers. Allow them to expand or sign longer term contracts to lock in the current price for X days.

- Apply new pricing to new customers & expansions.

- Migrate existing customers closer to new pricing on a timeline. I'm a sucker for heirloom pricing for your oldest customers :)

Understand where you are in the growth curve though; if you're growing 200% YoY and your early customers are thought leaders, then focus on new customer pricing and don't worry about raising prices. Oh, and whenever possible sell differentiated, mission critical products to businesses whenever possible.

Wow, the sensitivity, consideration, and care Backblaze consistently shows towards their customers is inspiring. I love companies like this, it's The Right Way To Be. Beautiful.

Yev from Backblaze here -> thank you Jay! Our customers were one of the reasons that we felt it would be interesting to share our process, so they could read about how we shot ourselves in the foot :D plus the story is so odd that it was just plain interesting!

It makes me confident to recommend your service to people. I know that I'm going to be recommending a product that will take care of the people I care about. I won't need to worry about you guys starting to use dark patterns to milk your customers (i.e., my grandma) for more money!

Yev here -> Yea! In the article I mention a few of our company core beliefs and one of them is "be the good guys" - we take that very seriously.

Backblaze customer here. Charge me more!

Yev here -> Hah, we have an internal joke about setting up a digital tip-jar for folks who just really want to give us more money. Maybe some day! :)

Backblaze, here's a story. My dad used to run a mailing service, kind of like a UPS store, but non-franchise. We also had private mailbox rentals (PMB) for customers. My dad ran the business for about 12 years. About year 7-8, my dad was like, I have to raise the prices of the PMBs. You know what his longtime customers said?

They weren't mad, but they were surprised. They said, "Damn, it's about time. I've been wondering for a long time when it was going to up. Good for you."

Yev here -> that's similar to what we saw too! It's one of those things where because we'd not done it, there was a bit of dread (not because we thought we'd be skewered, but because we really don't want to let folks down). However, once we saw the early responses rolling in, there was a collective sigh of relief.

I am totally okay with them charging however much money they need to in order to be reliable. I switched recently from Crashplan over to Backblaze because Crashplan just couldn't reliably get a complete backup of my workstation. Backblaze does not seem to have any problem with that at all. This is what I want from a backup -- after all, as they say, backups are worth nothing but restores are priceless. Another dollar a month is nothing.

Crashplan is kinda reliable to me... but sloooow. Recently had a drive die on me. Restore was buggy at first. Support seemed competent (hope that weren't just common text blocks) and gave me a more recent installer with my primary gripe fixed. That was about 10 days ago and I'm at 11% down of 3TB :(

Yeah, I can understand that not fitting someones use-case. Backblaze on the other hand didn't offer client side encryption when I last checked, so I'll have to stick with the slow one.

Yeah, when I say Crashplan couldn't reliably get a backup, I guess that "slow" would be more technically correct. 90 days after I hooked up my new MacBook Pro, it still did not have a complete backup. Just trickling data. I gave up and got Backblaze and it was fully uploaded in a couple days.

Yev here -> Thanks! Staying reliable and in-business are two things that we care deeply about!

Your desktop application for Windows (which I do not use personally, but have set up for a couple other people) is pretty great as far as backup provider applications go.

The one thing that wasn't spectacular was the signup flow. I found it a bit confusing: IIRC if you subscribe to Backblaze from the prompt in the application, it doesn't automatically configure when that subscription is purchased, so you have to download the custom installer or whatever the normal process is (I don't exactly remember, except that it was a bit less smooth than I wanted).

Nonetheless, once that was out of the way, my brother's two-seat setup works great, and it has given me considerable peace of mind that he will not simply lose all of his audio production files, and be crushed.

B2 is great value and I use it wherever I can.

Yep, for years there has been 0 issues with Windows backup application itself.

This article makes me truly appreciative that my product/service is not essientially a "commodity". Absolutely no disrespect intended for BackBlaze, as they have obviously gone the distance in adding value to their core "we store data" product.

That said, I generally find it easy to raise prices. Indeed, price discovery is "fun" in my tiny tiny niche. Basically, I just increase the price every time a new customer signs up. I honestly think this is completely fair to both past and new customers. Sign up early and you reap the benefits of lower cost. Sign up for a longer term and you keep those benefits.

It's a struggle with inflation, and I strongly appreciate the argument in accounting for it. It is so obviously real, yet customers seem to have an extremely hard time wrapping their heads around it.

If you sell a scarce popular product, soak the people first in line. If you build your business on the word-of-mouth advertised of the loyal customers who took a big risk on you, share the wealth they helped you accumulate.

My subscription got renewed this month. However I feel the pain of having to connect external hard drive every month (because at home, I don't use computer that much, but backups are must have). And actually my ext hdd broke down and there were no backups @ backlbaze, because I was too late :(

Luckily, was able to restore data by buying identical external drive, resoldering bios and voila - turns out it was just the controller issue.

May I ask (because Babklazers hang around here) why this limiation? Can it be increased? Can it be turned off? I don't have that much data and I feel I'm really overpaying for my gigabytes and better buy some home NAS or whatever. Probably wouldn't feel that way if I would be storing TB's @ Backblaze :)

Yev here -> glad you were able to restore your data! The limitation exists because the longer we keep data the more it costs us, the 30-Day Version History we have allows us to eventually reclaim space. That said, we're looking at ways to make it easier!

Goodness, I wish Backblaze had a Linux client. I pay for Backblaze for my wife's Windows workstation _and_ a second license for her Windows laptop, yet I'm stuck with CrashPlan for Small Business to back up my Linux workstation.

And before I get comments about B2 and Duplicity, my Linux workstation is also our NAS, so I'd be backing up roughly 4-5TB. I greatly prefer Backblaze, but not enough to pay an extra $200 a year.

> my Linux workstation is also our NAS, so I'd be backing up roughly 4-5TB.

They've said in the past that this is an important reason not to release a Linux client. Backblaze backup is meant for backups of personal computers, which generally have relatively limited storage themselves capacity. Add a linux client and many people will start running it on servers with many terabytes of drive capacity.

They have a page[1] on their website about NAS backup, and it points to B2 for a reason.

[1]: https://www.backblaze.com/business-nas-backup.html

It's an interesting thing to think about.

In practice people with "a lot" of data tend to put it on a NAS.

On the other hand that's only a single hard drive's worth of data. Somehow it's become almost weird to have even one big drive inside your computer. Even though an 8TB drive (the best price per byte) is only $150.

Backblaze has explicitly said more or less the exact reason they don't have a Linux client for their one-price-fits-all backup service is that they don't want people backing up multi-TB NAS devices. The folks over r/DataHoarder/ would absolutely destroy them if they offered unlimited backups for NAS devices for $6/month - many of them have hundreds of TB on their personal NAS'.

Its absolutely the correct business decision, and as you note, you are more than welcome to use B2 and pay per GB for as much storage as you want.

Simple solution: A limit.

you can still (probably) do that now using b2 cloud with duplicity or restic you just don't have an official Linux client.

Although I do use restic on my laptop (backing up to b2) I wish they had a nice official Linux client for desktops

(unless you are talking about non-b2 :) )

Then you pay a fair price for the space you actually use, not a flat monthly fee.

On Reddit they said the biggest user was storing 430TB on the $5 plan

Disclaimer: I work at Backblaze.

> they said the biggest user was storing 430TB on the $5 plan

Here is the histogram of Personal Backup sizes at the end of 2018: https://i.imgur.com/iVEuwUT.jpg

You will need to "zoom in" and then scroll over to the right to see the largest at that time.

Have you done a restore of CrashPlan recently? I tried to do a full restore before cancelling my service, and it didn't work. Downloaded a burst of files (maybe 5% of the total), then sat there spinning for a week or more with no further progress.

5tb?! They may not want your business ;)

Yep, I suspect that's probably exactly why they don't have a Linux client for their "Unlimited" backup system. (You can do it with B2, but B2 doesn't have an "unlimited" plan.)

I backed up 11TB. As long as we are outliers I don't think it's an issue. I can't imagine what would happen if everyone started downloading all the media they watch, though. Hopefully streaming continues to be realistic in the near future.

Disclaimer: I work at Backblaze.

> I backed up 11TB. As long as we are outliers I don't think it's an issue.

I work on the backup client, and I like larger customers for the reason that if the client works for the larger customers today, then it will work really really well for average size customers for several years to come. Larger customers help stretch and test the datastructures for me. :-)

We politely ask the larger customers to recommend Backblaze to their friends and family with less data. We live on the averages, so as long as that works out, we're happy to free customers from worrying about exactly how much they store.

So if you need a beta tester for a Linux client, you know who to ask!

And I just double-checked and it looks like I'm only backing up a little less than 2TB in Crashplan after all.

I think Crashplan Business is $120/yr. B2 costs $5/TB/mo or $120 yr. You could switch to B2 for the same price as Crashplan and avoid the Crashplan pain. (Although you may be in a transition period at Crashplan where it isn't yet costing you $120/yr).

Why not? The 5TB of storage is a one time cost for BlackBlaze (ignoring disk failures). If they backup 5TB one time and keep paying $6/month, eventually they will be profitable customer.

Ignoring disk failures and server operating costs.

That said, 5TB isn't a huge number. It could be as low as $200 of hardware cost. With them paying $60 a year, they may or may not end up being a drain on the company's resources. Though they're definitely not paying a full share of the fixed costs the company has.

Edit: Though the full scenario is paying for three clients, so $180 for that much data, and that should easily be profitable.

We don’t know how much their servers cost, but we can extrapolate how much storage costs to store 5TB over time since they report both how redundantly they store files, their hard drive failure rate and I believe the cost per hard drive.

> We don’t know how much their servers cost

Their blog posts say it's about $3500 without drives.

I didn't pull $200 out of nowhere. If you stuff a $3500 chassis with 60 $325 12TB drives (current amazon price) and you're getting 80% storage efficiency, that's exactly $40 per usable TB.

Add an extra 25% for safety, and then add a big $400 per month for power/data/space and replacing the one-ish drive per year that fails. Assume you throw the entire thing in the garbage after five years. These are pretty pessimistic numbers, but it's still only $92 per TB per 5 years. With three accounts that's $460 dollars of direct costs on a revenue of $900.

To be profitable on 5TB in one account is much trickier. It depends on the hosting costs far more than the hardware costs, and those are hard to guess. If they're over $150, it might be impossible to break even on direct costs, even given more than five years.

Oh, and a much simpler thought came to me.

B2 is clearly going to be profitable per byte. It would charge $20 for 4TB and $25 for 5TB.

In comparison to that, $18 for 4-5TB is probably not losing money.

why assume if they are publishing annual failure rates as well as the level of redundancy? Your assumptions are wrong.

Which assumptions?

They published that they use 17:20 erasure coding. Have they published exactly how much overhead they get from their filesystem? I don't think it's unreasonable to blindly guess 5% for that.

The published drive failure rates are about one drive per year per 60 drive vault, which is exactly what I said. And we can estimate the labor cost of replacing that drive as tiny. What we don't know is the cost of power, networking, and physical space for the server. So I picked $400 (minus the drive fraction) per month as a nice round "this is double what I can find for many colocation offers, but still avoids losing money" number.

FWIW, I switched from the Backblaze client to Arq + B2 in the past year or so. At this point Backblaze is little more than commodity storage to me and I stick with it because it provides the best combination of pricing and speed.

I switched to Arq once I had multiple computers to backup and paying by the GB for me is cheaper than paying per computer.

From a client-side perspective, Arq and Backblaze each have their own pros and cons.

Arq also sells a service* (rather than software) which stores on Wasabi. Slightly cheaper for my own needs (<1TB) and much less of a headache.

* https://www.arqbackup.com/arqcloudbackup/

Thanks for mentioning Arq, that looks really useful. What are the cons you've found?

For all things not purchased with debt, this is true. But look at the housing market. Or, consider industries with severe information asymmetry: see the healthcare industry. Raising prices is no problem for two of the most expensive line items in a middle class household's budget.

For everyone else, it's probably best to start with high prices.

Well, it's not a matter of debt. It's more a matter of whether or not new entrants can enter the market and provide that good. In both real estate and Healthcare, it's very difficult for new players to enter the market, especially in highly regulated states. The result is a market where prices are much higher than they need to be.

I'm glad the people at Blackblaze really look like (from this writing and others) good people who want to run a successful business while doing right by their customers. But...

Jeez, clearly they did not hire patio11

While they technically did _raise_ prices, I'm quite certain they had a lot of leeway to have raised them a lot more

Yev here -> yea, someone needs to send Patio11 this article, maybe I'll do it. I'd love to hear his take-aways. It's tricky, some of the folks internally were like "Oh man, response was so positive, we should have raised it by a lot more" and that's a tricky takeaway to refute - but it's important to remember (at least for me) that any deviation could have had dramatically different results, and because we've already done it - we can't test a first-time increase anymore!

Yeah he had some thoughts on how tarsnap should price itself at https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/ which I think suggests that he would consider Backblaze underpriced.

It's funny running into this article for the first time.

I've been using Tarsnap for a couple years now for our SAAS. After receiving the first month's email receipt for $0.25, I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already.

Having gained a bit more experience with pricing our own product this past year, I think it might not be as simple as "he sucks at business".

Here's some potential (and highly speculative) reasons:

- He may not need the money. He's got a respectable day job that pays well.

- Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo.

- Higher prices mean you sell to a different audience with more responsibility. High touch sales, support email threads with 10+ folks all demanding different things, handling exotic types of billing, etc. Many devs don't like dealing with this kind of stuff.

- What if he's doing this as a lead gen for his consulting services?

I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already.

I do hear that quite a bit, but I also hear a lot of people saying that Tarsnap is too expensive. I figure that as long as I have complaints coming from both directions I'm probably somewhere close to the right price. ;-)

Sorry about not replying -- I usually do reply even to emails like that, but it's possible that I was overwhelmed with email at the time.

- Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo.

This is part of it -- Tarsnap wouldn't get nearly as much free advertising if its prices were higher.

- What if he's doing this as a lead gen for his consulting services?

No, I'm not doing that. In fact I do very little consulting these days.

> This became a full-time job for a handful of our most senior engineers, and resulted in a six month project before we were ready to put it through our QA testing.

So let's say that you pay your senior engineers $150k, 6 months is $75k per engineer, say 3-5 engineers, that's $225-375k. Plus QA time, etc.

It might have cost the company $500k just to implement a program that would reduce their revenue by letting people by in at a lower price.

I'm not saying this is the case here, but I often see companies I've worked for not do this kind of math, the opportunity cost of implementing a feature or product.

Yev here -> while the numbers aren't entirely correct in our case the equation is correct. We do account for engineering time and opportunity cost of other projects that aren't getting worked on (though we tend to stack projects so while one team works on, billing, another will work on UI, when billing team is done they'll move on to the next project, etc..). One of the side-benefits for us in this case was building out the Extensions program meant we had to build a more robust crediting system, which is code we might be able to re-use later!

Backblaze, don't worry about the prices. You are good.

Two things you can improve are (1) more official sdks (2) see if you can simplify your REST APIs.

Other than that, thank you! You are awesome

Yev here -> Noted!

I hope Backblaze lets me pay them to back up everything including /Applications, my home directory, and /Library one day.

I have to say well done BackBlaze. This to me is an integrity move!

I considered them when Crashplan threw me away. I've really liked what I see of Backblaze as a company, but sadly their services come up short for me.

Personal is cheap but too basic (keeps file versions for 30 days only, no backup on external drive/NAS). B2 is seems to be too expensive for my 1TB of data.

They also lacked a data center in EU, learned my lesson with Crashplan on that one, though I hear that is about to change.

Currently I've settled for Acronis True Image. Not exactly the same, but more options, faster to get things running again after a proper HD crash (tried that a few times already) and they're cheaper than B2.

But yeah, had I been a customer, the price hike would have been totally fine.

Yev here -> things have changed! For 1TB of data on B2 the cost of the service is actually LESS expensive for B2 than the computer backup ($6/month unlimited). B2 is priced at $5/TB/Mo - so that price has stayed the same. We also just opened a data center in Amsterdam - so you can create an account in the EU and your data will be stored there! Not sure if that helps, but figured I'd let you know!

Thanks for the reply, it does indeed make it a lot more attractive.

The main issue I have with B2 is that I'll be using some client where the API transaction costs are a complete unknown, at least to me. I have no idea how many API calls of the various sorts the different clients will use, and how they scale with my data.

I have a almost two million files, if a client uses one or two B or C API calls per file when processing the backup set, then that's 5-10 bucks right there.

Yev here -> very true, but for a backup those should only occur once and there's a free amount per day. The nice thing about our integration partners like Cloudberry is that they go through qualification and we help them develop so if their apps start to go haywire it's usually caught quickly and fixed rapidly. It's been pretty rare for the transaction calls to go haywire.

Another thing you can do to protect yourself if that's a big worry is by placing a Cap or an Alert for a transaction type. That way with an alert we'll notify you when you're nearing that cap so you'll have forewarning instead of just being charged (or if you set the cap, we'll stop until it's been lifted or reset).

I agree with some of the other comments here, this sounds too apologetic.

I'm signing up this weekend for a personal account to backup around 100GB of family photos and videos.

I've been using the HDD reliability data to choose my drives for many years and this looks much cheaper than S3. I was also impressed by being greeted as a linux user and sent to this page when I hit sign up: https://help.backblaze.com/hc/en-us/articles/115001518354-Ho...

That was my experience too. B2 is great value and a heck of a lot easier to configure through their web portal than S3.

Based on the price comparison tool they have, their prices are 4 times Lower than Amazon, Microsoft or Google Cloud!! I would think that people would flock to this platform.

I'm bookmarking it, that's for sure.

Likewise. I've known the name for a while, just never looked into it much. The prices seem very good!

Wouldn't it have been simpler for them to raise prices for new customers a year ago and leave the existing base grandfathered in?

It seems like I have this discussion at work from time to time. The faster we grow our customer base the harder it is to monetize our improvements, because we have a smaller and smaller pool of new users.

Getting big before you get your feature set and cost structure down means you have to go ask forgiveness from old users.

If instead you launch a big ad campaign after improving functionality and increasing the prices...

Yev here -> Maybe! That was one avenue we were considering - do the announcement, then make the increase only effective for new users instead of existing. I think one of the reasons we shied away from that was it would create different user "classes" and we'd need to keep that tracked somewhere, so it would still have been some engineering effort to make sure that all the billing code worked correctly. Eventually we decided on the extension program because it also moved up some revenue, even though it was deferred.

I had a 100EUR per month subscription deal on geocode.xyz and someone was dubious as to "why it was so cheap". Doubled it to 200EUR per month and everybody is happy now.

It all depends on the cost of switching. If the cost of switching is really high then you can screw over customers all you want and raise prices considerably before they move away.

However, if the cost of switching is very low, you'll find it's much harder to raise prices. In industries and products where switching costs are low, prices tend to be much much lower anyway, especially if those users are easy to reach.

According to the article some of the difficulty is self inflicted. For example they were planning to raise the price for some time but then one of their competitor left the consumer space. It would be the best time for them to do the hike but they decided against it because it would be a nasty move.

Maybe it's just me, but it always seems like a cash grab whenever a company updates its prices and allows customers to prepay x amount for the old price. Why not offer a discount, or coupon code instead? Not saying that I disagree with the price increase, just that specific method of rewarding existing customers.

Yev here -> it does absolutely move money "up" - but as a company (at least if you're disciplined) it doesn't mean you get to use it. You're basically deferring revenue (the amount lost from not increasing prices on existing customers for X amount of time) and the money you bring up is for a service you still have to provide, so for accounting purposes it's more or less "locked down". So you're absolutely right, it does bring money forward, but there's costs involved as well!

I loved Basecamp history of raising prices. Thay just made x2 increase overnight, but just for new customers.

One of my favorite companies! I plan to become a customer when we finally get proper VDSL/fiber connections here in Greece, currently 900kbps upload :-( They’ve just opened an EU datacenter(DC4) in Netherlands. It would be nice to see a future blog about distribution of customers.

> The year following Crashplan’s announcement we saw a huge increase in customers, which is simultaneously good and bad

No, this is GREAT, but you have to do it right! You should have increased dramatically the pricing for new customers to keep the growth at acceptable levels (in terms of absolute numbers). This way you would have had a lot better margins from new customers and could have scaled your business in a more controlled way.

> raising prices on the day when the industry started having fewer options would have been the right financial decision, but not the right Backblaze decision.

It would have been the right Backblaze decision, because you would have secured a decent margin to provide the best service you can to your customers.

> We’ve all been subjected to price increases that were clandestine, then abruptly announced and put into effect the same day, or were not well explained.

Not sure if I use radically different services, but this never happened to me! Usually, you get months of time in advance to get adjusted to the new pricing.

Yev here -> Interesting takeaways! It was difficult to map how many customers we'd gain after Crashplan left the business and how many we'd have gained if we had raised prices by a lot more. It was made more complicated by the fact that they partnered with our 2nd largest competitor, so we also had to do a quick "sanity-check" about whether or not we wanted to raise prices to near their level, or stay the same until things calmed down. Thanks for the insights!

I used to manually back things up on premise but then it became just too painful and without proper raid I never knew quite when my number would come up. With BB I never worry about. Hopefully I won't ever have to use their retreival service. So far so good.

I have had to use their retrieval process.... and it has been SUPER easy. Just selected the drive that failed, they sent me the new one..... copied the data off, sent it back..... no cost to me!

I have had to do it twice so far (my system has 6 drives in it... all included in the standard plan!)

Been super happy with the service.

Yev here -> Glad you enjoyed it and that it was so easy!

Doesn't this just depend on the price elasticity of the good or service in question...?

Yev here -> in purely academic terms maybe, but there are a lot of factors which go in to whether or not a person will leave or stick around. I thought it'd be interesting to write about our journey (since it was super atypical) and provide some insights into how we make decisions.

Your openness and engagement is highly appreciated. It's always very insightful and pleasant to read about how you're running your business!

Thank you so much! We love sharing and hope it gets others to be more comfortable doing it as well (to our knowledge no one in SaaS really talks about churn rates if they can help it). The idea being, the more folks that talk about things the better. If you can avoid making a mistake someone else made because you read their story about it from their perspective, that's good for everyone!

You could probably have saved yourself a lot of heartache if you started with an aspirational higher headline price (but with easy launch discounting/coupons.) Then you just reduce or remove the discount. Same effect financially, but very different psychologically.

Would be curious to read "raise prices" patio11's opinion on this one.

I honestly didn't realize the price had gone up until I read this post. Checked my billing history and saw it's been $6 the last few months. Shrug. Underpriced service that I'll keep paying for.

I didn't need to read an explanation to why they're raising prices, this is something I really value and I'm happy paying a dollar more to know I can rely on Backblaze.

I gave a try to Backblaze but stopped using it when I noticed you have to send to their servers you private key to restore your files. For me it's not acceptable.

I'm guessing the negative churn rate on their churn rate graph is due to using inappropriate smoothing, rather than anything real?

The whole online backup thing would be great if I wasn't already bumping up against my ISP's 1TB monthly transfer limit.

You generate >1TB of fresh new data to backup every month? That is not like average user usage.

Large initial backup is a problem indeed but you can split your initial dataset for months.

No, I just already use almost a terabyte with no backup activity at all, and how much I download is something I have to be conscious of. Having to balance that along with upload usage would be a significant hassle for me.

Nice article. I just signed up as I've been having a heck of a time with my time machine backups just failing. Great timing!

Yev here -> Welcome aboard!

In reality by keeping their price flat for a decade they’ve lowered their price every year in real terms.

* For consumer products.

B2B products often have annual price increases built into contract.

Reply on news.ycombinator.com