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Comment by existencebox | Hacker News Reader

My somewhat cynical hypothesis regarding "Why does everyone insist on putting customers into price brackets based on such a useless metric" (And I do not mean this as a dig at Gitlab, to be clear, just an examination of the strategy.)

If there is a curve "amount of money a company of a given size will pay", in certain applications, server load, bandwidth, and disk space utilization likely scales far below that trendline, whereas per-user tracks far closer. It also ensures there is effectively no upper bound on CLTV as a given customer scales out, even if net-usage only increases logarithmically/asymptotically.

To try and be even-handed and take a more generous interpretation as well, the former is also less likely to be cogently communicable to a customer, and may have painful UX when limits are hit.

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Also smaller companies tend to come with an outsize support burden that can chip away their profitability to be a net loss that grows over time. That burden grows the more people you have using the product.

You took the words out of my mouth.

Except I would say what instead of a certain applications this is true for the most of applications. If something doesn't uses tons of traffic/storage and is user facing then the resources spent per user are minuscule, you would spend more time and (even literal) energy to actually track and bill the user for the spent resources and somehow explain why some resources are billed for the insane rates (because you need to bill some thing for insane rates to make up $10 ARPU/month).

I had the same problem recently - I was musing about re-selling my monitoring solution (I'm using it myself, at like ~2% of the VPS I'm renting) and the first thing of course was the idea to base the price on the load each client would generate... and I pretty quickly come to a conclusion what I can't reasonably price things at $0.10 per unit, because the time I would need to spend on the setup is way, way more costly for me than that and that doesn't include billing hassles in any way.

So yes, billing per user is not only beneficial for the provider on the "user is paid wherever it uses the resource or not" but also allows the provider to not to spend time and money on actually implementing the way to bill the user for the resources.

if your onboarding is automated/nearly free

and your costs track a certain number (e.g. number of checks/hosts)

why would you bill per user?

if you did all that and you have the right LTV and CAC numbers, at certain point you could basically run it on auto pilot

billing per user, but maybe you have 1 power user in a team, and a few extra accounts for non tech/backup/etc, which login once a month to check something

> if your onboarding is automated/nearly free

It isn't and the cost of developing something... is too much for a side gig with the intended purpose for the VPS to pay for itself.

> why would you bill per user?

In my situation I don't need to bill per user (and it would be counterproductive for me to do so in the long run), my point here is what my price calculation per resources spent doesn't correlate with my resources cost in any meaningful way, at least with anything with the word 'income' in it.

> and your costs track a certain number (e.g. number of checks/hosts)

In the end I just drew some arbitrary numbers for a checks/hosts numbers, slapped the price tag of a couple bottles of beer and called it a day. One person was happy with it and he uses only a couple of basic HTTP checks (so maybe around 0.002% of VPS? Who knows). Other one said it was too much for him. *shrug_emoji*

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