For instance, startup X seems profitable but all revenue is from other startups not making money yet. Like a big ponzi scheme of sorts. Most products mentioned in the article are now mainstream, but for lots of them a few years back they were small and only used by other small startups.
In service fee markets, the brokers walk away with bags of cash.
You gotta advertise to get traction, and the best place to do that is where your users already are..
What is boneheaded is advertising shovels to me because I was tracked while buying another shovel online. I already have my damn shovel for the next 50 years I do not care anymore at all about shovels. Now if I were served a wheelbarrow ad...
For example, I used to use the MixPanel free plan in a project and went over the limit and suddenly the plan cost around a thousand dollars per year.
I see those tools mostly like a fast computer, good internet, drinks and snacks etc. They really aren't that expensive compared to the employee but they will help the employee be much more effective.
The problem that gets easily overlooked is that compared to the costs being made, the profit in many cases is also just a small percentage of the revenue, and the small % increment in costs can mean a large % decrement of profits. You should always compare incremental cost of revenue to the margin, not to the base cost.
Now if you are running a profitable SaaS business with 80% margins, a 4% increase in spend might not mean the end of the world even if it was wasted on spurious licenses or other frills, but if you are a healthy service business operating on 12% margins then that 4% increase will reduce your profits by a massive 33%.
This doesn't mean that you have to make do with the bare minimum and skimp on decent hardware or development environments, but it also means the marginal productivity/retention/quality increases must in the end be worth it in terms of increased aggregate profits, and not be justified as 'you already pay me 5K a month, so whats another 250 for ...
But if they do improve the metrics, you'll typically get more done, which will translate to more revenue. Software & tools tends to be somewhere between 0.5 and 3% of total employee cost in my experience, but of course it's not priced per market, so that would be significantly higher with the same tools in an area with lower salaries, less non-wage labor costs etc.
I've seen businesses run on Microsoft tools and Engineering tools exclusively.
One thing that's been really interesting is seeing how many SaaS tech companies products just don't work for us at all, for example Intercom.
Intercom is a great product, but all of their pricing is centered around how many people use your site. If you have a high-touch sales and support pipeline where a customer is worth $$,$$$s, Intercom's pricing makes sense. If you have hundreds of thousands of customers worth $$s, that's still a workable business, but Intercom's pricing is a complete non-starter.
They aren't the only one. I do wonder if they truly understand how much they are locking themselves out of some markets. Another example was the quote we got from Grafana Cloud that was more than our AWS bill.
But the flaw in my logic is that the one, sometimes evolves into the other.
My counterpoint would be that the B2B companies don't always seem to recognise this, but it's not to say they haven't internally decided not to pursue that market. I think it's a shame if they have, it's a very large market!
Their pricing page is pretty confusing, I'll be disappointed if I hit some sort of hidden price cliff.
Google has over 82 million unique users a month and annual revenues of about three billion dollars. And yet have you ever seen a Google ad? Something is going on here.
I want longevity in my tooling, and I personally feel it's irresponsible to put your product into the hands of thirty companies who are all on the same growth or die cycle.
Might very well be the case.