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Comment by patio11 | Hacker News Reader

If successful, it might not be unusual for an average customer to send and receive 50 SMS messages a week from my app.

Will this create $20 a month of value for them? If yes, charge $20 a month, pay e.g. Twilio $2 a month for your most active users and mouse droppings a month for the majority of your users. Problem solved. If your app does not create $20 of value when getting someone's attention 200 times, why bother making it?

There's a app out there which, essentially, provided a particular type of SMS services to a user population who thought SMSes were expensive. They grew like absolute wildfire, because the company underwrote their SMSing. They had no monetization in sight, because their core customers were too poor to pay for SMSes, and (luckily) got acquired before their telecom bill exceeded several million dollars in funding. If that is a trajectory which sounds appealing to you, well, that's an option, too.

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The model I'm thinking of is freemium -- allow free usage over SMS for most consumers, then charge for those who sign up for business-level features.

What's got me thinking is that, unlike a classic website/app model, using SMS means I could be burning quite a bit of cash. Heck, it meas some random competitor could just start making me spend money for nothing (From what I understand, guys like Twilio will charge you for incoming texts even if you don't want them) It's like opening up your wallet and asking people to take money out of it. A very different model from the kind of control over costs I'm used to having.

But perhaps I am borrowing trouble.

I spent a year with a friend trying to figure this problem out. We created a real-time Craigslist, allowing communications over SMS, XMPP, email and voice, and hooking up buyer and sellers to talk to each other based on best match of keyword, price, location. We only allowed a handful of friends to use the service for our own testing.

The only real options we came up with were:

- charge sellers enough to compensate for all of the SMS traffic

- only allow SMS on paid accounts (still doesn't solve the problem of being charged for all incoming SMS, whether you respond to the SMS or not)

- find investors

The route we took was to convert it to a product targeted at businesses.

Single accounts per device id/email/etc. with a usage throttling on free accounts would greatly limit competitors from blasting your system with spam that you'd have to pay for.

As far as not losing money in general, twillio is a great service but it's also one of the more expensive. There are competitors now so shop around a little bit. Overall though you'll most likely have to have a good advertisement system, some type of affiliate sales, or initial paid users to keep it running for awhile without investment backing.

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