Can’t monetize free users? Try threatening them with legal action
teamblog.supportbee.com
teamblog.supportbee.com
1. Our "Free" product is now $6000/year ($500/mo)
2. OR give us a link-back
3. OR prepare for a lawyering
There are 17 different emails they could have sent to SupportBee that would have been more constructive than this.
I wonder if the Gigya team is too young to know better or if they have back-breaking pressure on them from their investors to turn any sort of profit before they are all taken out to sea and shot.
Obviously a stupid response, but really seems to be a response out of pure desperation more than anything.
If you are not cashing someone's checks, they are not your client.
For example if the TOS were revised two years ago, then it is possible that there was no longer permission to use it (it is also possible that permission continued).
1. $6000/year, OR
2. link-back, OR
3. If neither of these options are chosen within 3 months,
we will disable the service on our end.
Yes, that seems to be the simplest explanation. But from the original article this was the second communication as well. The first one, (which is linked), was pretty clear that the choices were 'give us a link or pay us money, your choice.' The author notes it had a useless subject line. And useless or not, if a vendor I'm using sends me an email I read it, and if it truly is useless I ask them to not send useless email.
So this was an escalation on the part of Gigya from "We've changed our pricing, we don't offer a free version any more so you have to choose a new option." To "You ignored our previous response, let's be perfectly clear about what your choices are."
Now you can argue that the sequence might be: nice, nice, threat. But if the company is looking at a shrinking runway they might cut out the middle 'nice' version of the communication.
And the author comments "This almost makes it a paid link that can help them rank up for ‘Social Media for Business’" No, this is exactly a paid link for helping Gigya rank higher on Google. Clearly they feel like the paid link is 'equivalent value' to the $6,000 which they want to charge.
The only economic question here is what economic value does SupportBee put on a paidlink on their site? If it were less than $6,000 then they win by giving the link to Gigya, if its more then they should just pay the $6,000/yr. (or use a different service).
I can't find a lot of fault on Gigya's part here. That it caught SupportBee by surprise seems to be because the author didn't read their mail.
> So this was an escalation on the part of Gigya from "We've
> changed our pricing, we don't offer a free version any more
> so you have to choose a new option." To "You ignored our
> previous response, let's be perfectly clear about what your
> choices are."
> I can't find a lot of fault on Gigya's part here. That it
> caught SupportBee by surprise seems to be because the
> author didn't read their mail.
As you pointed out above and I mentioned in my comment, there are innumerable better ways to state what they were trying to get across and they chose one of the poorer ones.
So no problem with what they did, just how they did it.
I also can't help but wonder why they didn't just disable the widget for that client after the 1st or 2nd notice, let the client come to them and then start a peaceful up-sell discussion where a well-informed decision could be made (exactly the way you stated w.r.t. to the worth of the widget/vs first-page linking for SupportBee).
Net-net, nothing to see here, just some people being more rude than expected.
Why so rude? My guess is financial pressure is causing them to act more aggressively to secure income; as you put it, a shrinking runway.
I think this is almost the right question. The real one would compare the cost of having a paid link on their homepage, the cost of the service ($6000) and the value of the service. If the service isn't worth the cost of the paid link or of outright purchase, then dropping the service is the right decision.
Threatening legal action to the very people you worked so hard to get to use your free platform is just asking for problems.
Most of the Gigya apologists I've read seem to say something along the lines of, well the chips were down and they were shooting from the hip. As every true gunslinger knew, this was the fastest way to get killed.
Legal threats? Good riddance to you. I'd not touch your service if it sent me free money.
Also, keep distinct the notion of general communication between a company and client, and serving a legal notice.
I typically expect an "its their buisness, their prerogative" type of response here on HN, how is this situation any different?
Because the notice came by email? I'm sure if the first suportbee heard from them was a cease-and-deist letter in certified mail everyone would (rightfully so) point out that it could have much more easily been solved with a few email explaining the change.
Because the notice didn't come by enough (or good enough) email? I'll give you that it might be worded a bit strong for a second notice, but this is buisness, not a cuddle factory. Is it really worth getting your panties in this big of a bunch?
Instead of saying "please stop using our service or start paying" (or face legal consequences), they should have said "please start paying or your widget won't work any more".
That they use legal threats instead of an on/off switch to block access says something about their competence.
Do they really think this is a good tactic? It immediately creates tension between them and the client. Even if you paid up or added their link to your page would you trust them in the future? Absolutely not.
I've typically read that they don't work. For example: http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-...
All offer a non-trial/non-expiring 100% free home user version of their security software, with a more feature rich premium option available for payment.
Freemium works like gangbusters in some industries.
Also, you could make a case that these are not truly freemium, since any commercial use requires payment.
We have people routinely write in to us - 'Ive used your product for years and it's worked so great I just want to help contribute' and so they buy a license - just out of gratitude from years of free service and not because they are looking for any of the Premium features.
Regarding the 'cost of free users' - the cost is negligible. It's not like we write different definitions for the premium and the free - they all share the same definitions so there is not duplication of effort. Also, usually security software also acts as a 'data collector' in that it sends back suspicious files back to the lab for analysis. In this respect, having hundreds of thousands or millions of free users makes it easier to write definitions and protect all of our users because they provide us with more samples than we would of otherwise had access too. We actually ship a better product BECAUSE we have such a large # of users (both free and paying users).
Regarding 'cost of free users', I was thinking of support costs. Even though a user does not pay for the product, they still expect to get help when they run into trouble. And if they don't get help, that could wash away some of the goodwill they might otherwise feel.
Also, bandwidth costs for downloads.
Some companies do not offer phone support (especially not to Free users), so this limits free users support down to just tickets and forums (which can be user-moderated to a large degree). Some companies have had success bouncing free users who need support to 3rd party 'PC help' type companies who can work with the person over the phone - for a hefty fee of course, and part of that goes back to the originator as commission.
Dropbox has a freemium model and is probably profitable or on their way there.
One thing both have in common: they are basically giving away disk space. Storage costs are trivial -- we're approaching pennies per GB -- but giving away CPU time or bandwidth is a much riskier proposition.
I'm not saying freemium will never work, but let's face it: it's ubiquity is because it was at one time the flavor of the month startup model that VC money was pouring into, not because it is a superior or effective business model.
So the freemium model is like any other small business?
Not perfect correspondence, but pretty close. :)
1. Can you monetize free users with your product? In many cases you can, using ads, affiliate links, search partnership, ...
2. Is it cheap for you to support free users? This have to be compared to conversion rate. If it is really cheap to support free users than you can have bad conversion rate.
In some specific cases the freemium model is the only model that works: products where interaction with other users is required for product to be usable. Only example I can think of right now are online games. You need players in order to attract more players, some of which may convert to be paying customers.
* Charge for your game
* Build up a loyal fanbase
* Continue to provide actual new content for players, for free.
* Start selling hats
* Stop charging for the game (nearly four years later).
I wouldn't necessarily mark up TF2 as a freemium success as it only went to the model fairly late in it's life (after it had already more than made back it's budget, likely).
Everything we offer is offered somewhere else for free, but we just package it all together in a much easier format. That's a tough sell out of the gate but once people get a taste of it, they understand why it's worth it to pay.
You can get many users to sign up for free and they can be great advertisers for you.
However, providing something for free can also trick you in deciding which features to build and whether people really want the thing you build. The difference between free and $1 is much bigger then $1 and $10. I believe that is where a lot fremium startups fail. They just assume 5% of free will convert. Nope: in many cases it is 0%.
So I never sign up for service which is free and there is no way to upgrade to some paid version. Even if they are in beta.
Even if their ToS reserved the right to start charging for the service at any time, and explicitly wrote in crazy terms that disclaim them from notification periods, methods of notification, etc., their odds of collecting actual dollars by force are infinitesimal.
Sadly, their odds of collecting actual dollars by threat of force might be pretty good. How sticky is their solution?
You might need to put in a bit more effort than a single email with a crappy subject line and a follow up email threatening legal measures. Maybe something nice and friendly even?
Someone said maybe they are a young team..sounds like the kind of crap corporate dinosaurs would pull to me.
I do not understand so many tech companies' reluctance to pick up the phone. Often you can resolve whatever you need to resolve in 10-15 minutes, and you don't come off looking like a jerk during the process.
By ignoring (accidentally) the original email, the message sent back could be interpreted as: "We're not implementing your link back, and we're not paying for your service, but we're still going to use it anyway".
I'm playing devils advocate here, but there are two ways to look at this.
Moreover, that e-mail was just really ham-fisted. Why not say "your service will be discontinued if you don't respond" instead of going thermonuclear with legal threats? It reeks of desperation and disregard for their existing clients.
Prices change. I don't expect to buy a Mars Bar for 15p from my local corner shop as they sold it to me that price 20 years ago.
It is fine to say 'we're discontinuing your current plan, sorry'. Maybe be nice and offer them 3 months more free to transition if you can afford to. NEVER grandfather.
What you don't do though is threaten legal action because you changed your T&Cs, that's just stupid and regardless of you CYA 'subject to change' clause you're not going to win in court and you just made a bunch of pissed off ex-customers telling everyone you suck because you threatened them.
Grandfathered users will hold onto their subscription like it was made of gold. Even if they don't need the product anymore, you'll find them still hanging around for years because they know what a great deal they're getting. In mildly-innumerate-user-psychology, they're making money every month by keeping that old grandfathered plan.
So even though those guys are making you less money, they're going to continue making you that money pretty much forever. Way more over their lifetime than they would have had you forced them onto a more expensive plan, pissed off half of them into leaving immediately, then watched the rest trickle away through attrition.
It's worth giving an existing customer a $10/month discount by way of a grandfathered plan if it means they'll stay around.
Keeping up the service but demanding money with force would make me incredibly wary to do business with them. It's destroying trust and goodwill, and pretty much guarantees that, were I in that position, I'd be looking for alternatives with whom I could have a more healthy business relationship.
Need to make money off what used to be free? Fine, but be polite about it. A business operates on the good will of its customers, who they've just annoyed.
By ignoring (accidentally) the original email, the message sent back could be interpreted as: "We're not implementing your link back, and we're not paying for your service, but we're still going to use it anyway".
Wait, what? So - if I ignore an unsolicited email, that suddenly becomes actionable if I don't do what the email says? I have a hard time seeing how that is not totally unreasonable.
The only reasonable nuclear option for them that I see, would be to simply terminate the user account or service, if they did not respond.
One could argue that the email was not unsolicited, if the email address was obtained during signup and acceptance of the Terms of Service.
Since it is not uncommon for free online services to have Terms of Service which allow the provider to unilaterally change those terms, the argument that an email notifying the user of the change is unsolicited is further weakened.
While I am not suggesting that the alternatives offered are or are not fair or reasonable, the follow up email did its job in getting the service consumer's attention and more importantly action in regards to the matter.
Is it right thing to sue them because they have sent 2 emails for a service that was offered free? Definitely not.
The right thing to do would be to terminate the service for such a free user & get their attention.
[IANAL] Probably not (in the US). In the US, anyone can sue anyone else over anything. [Not that I doubt email notification might present problems in court - but who is going to court over $6000?]
It is still unreasonable to send out legal threats because you did not receive a response from an email. You don't know if the email was read, or if it was even delivered to the user's inbox (it could have been flagged as spam, for instance). Or, as it appears to be in this case, it could have a poorly worded and misleading subject, causing it to be ignored.
Furthermore, did you read the email that was actually ignored? It is linked in the article, and located here: https://gist.github.com/1833289
Note that it specifically says that "if you agree to this arrangement" to implement the link back. There is actually nothing in that email that would suggest that any action was required; the next step sans link back was simply for Gigya to then send a price quote.
While I am not suggesting that the alternatives offered are or are not fair or reasonable, the follow up email did its job in getting the service consumer's attention and more importantly action in regards to the matter.
Well, naturally. I was not arguing that being unreasonable was not effective in forcing action on someone's part. I would argue, however, that it is unethical and counterproductive.
Hardly unreasonable universally - particularly when it comes to non-payment.
And it is clear from the first email that the link back is an alternative to a license fee [from your link]:
Hello,
My name is Atara Herskovics, Senior Marketing Manager at
Gigya. We're pleased that Muziboo.com has been enjoying
Gigya's Wildfire share plugin for a while;
however please note that as part of Gigya's
business model, for the last couple of years
we have been charging a license fee for the use
of our social plugins. In recognition of the
fact that you were one of Gigya’s first clients,
we would like to provide you with an alternative
option in the form of a link to Gigya
that you would place on your homepage.
If you agree to this arrangement, please
implement the exact link below:
<a href="http://www.gigya.com/">Social Media for business<a/>
Alternatively, we can send you a price quote for your
continued usage of our Wildfire product.
Thank you,
xxxx yyyyyy
Senior Marketing Manager, GigyaThe issue is not with them wanting to charge money or get links or whatever. The issue is that they escalated way too hard and way too fast when much kinder effective measures were available.
The articles mention of the link back being a paid for link is exactly what it is - in exchange for not paying $6000/year you have the option of placing a link on your site. It's a fair option.
In this case, for one it's not clear to me that we've gotten the whole story. In particular, what were the original terms of service, and how did they change? Did supportbee read and comply with them? The current ToS says explicitly:
>"Any notice or other communication to be given hereunder will be in writing and given (x) by Gigya via email (in each case to the address that you provide), (y) a posting on the Gigya Site or (z) by you via email ..."
And really, did they have to send any notice at all? If supporbee was failing to comply with the ToS, couldn't Gigya cut off service or take legal action, sans warning?
Meanwhile, supportbee doesn't want to put a link on the webpage for a service that they use and benefit from for free, and they throw a small public temper tantrum about it, and we are sympathetic? I'm just surprised. Aren't we overreacting about "legal threats"? Isn't this pretty standard and run of the mill? It could make more of an effort to make you feel good inside, but that's not really enough to make it wrong.
Other than the "powered by rackspace" in the footer, it's blessedly ad free.
It's a legal term to describe somebody getting money through abuse of their authority (e.g. requiring bribes under threat of prosecution) or charging illegal interest rates (e.g. usury). It doesn't mean "setting your prices too high but your customers can leave". Because, if it were extortion, SupportBee wouldn't be able simply to remove the widget and end the problem.
I see how it came to this: he says he didn't notice the previous email. Given that perhaps he should have more sympathy for their position believing their request has gone ignored.
I do agree that legal action claims are premature. It's also not very clear if they could prevail in a theft of services case against someone using their service after being asked not to (obviously consent to use the free version has been withdrawn).
Clearly it would be a lot simpler to shut down the former client's access than it would be to drive something through the legal system. It could be argued that without properly notifying customers a service is about to be shut down, the customer might have cause to bring legal action against the company, this may be why they are doing notifications and requests rather than just unexpectedly disconnecting.
Either party taking legal action at all in such a case is probably a foolish move. Not because it's a reaction to "not monetizing", but because it is unlikely there would be a positive outcome for any of the parties in such an action.
Blogging one's (I think) unjustified rage seems as premature as the legal threats.
Now looking at another angle. I don't think ad links are worth $6000, but the company says they would be happy with that. It sounds like the $6000 figure might actually be a fake number that they believe will motivate users to choose ad links instead, which is the real goal. The way they have approached this goal is poor. In this case, the user obviously doesn't want to use an ad link. Perhaps he would be willing to pay $100 a month instead of $500? We'll never know because of the way it was handled.
Both sides should have given the other side more of a benefit of the doubt until determining the real intentions of the other party.
edit: this being vigorously downvoted is pretty amusing.