Birthday candle billing

April 6th, 2020

Just as the cloud has become a popular delivery model for software, SaaS has become a popular revenue model for the businesses behind them. I’ve begun to think we’re over-fitting for SaaS though, as it’s become the default expectation for founders and investors.

For instance, I love using Whimsical, a fantastic diagramming and flowcharting tool. Miles ahead of Lucidchart in…well, just about everything except Enterprise-Readiness. I’d love to pay for them except…the last time I used it was November, 5 months ago. In fact, I tend to use Whimsical about once every 4-5 months, whenever I need to visually outline an idea. I definitely don’t want to pay $120/year for software I’ll use 2-3 times a year (for maybe 2 hours each).

Compare this with Concepts, a whiteboarding app for the iPad. Once I tried out the application, I bought the Essentials pack ($15) without hesitation. I similarly only use Concepts maybe once a month, but being able to add it to my toolkit is satisfying/

Contrast this with 1Password, which I use nearly every day and costs $5/month for my whole family. It took me years to convert over, but I consider it a worthwhile subscription and one that I know I derive value from.

Just like we created the analogy of certain software to “toothbrushes”, I think other software is inherently more like birthday candles, used only a few times a year but absolutely essential when they are needed. The subscription billing model does not feel right because I don’t feel confident I’ll use the software every billing cycle, anymore than I can guarantee I’m going to throw a friend’s birthday party every month. Yes, I could subscribe and unsubscribe to Whimsical every time I use it, but that puts the burden on me, the user.

Instead, I’d love to see more usage based pricing. Slack does this, billing only for active users. They’re obviously confident that once an organization adopts Slack, all employees will be active, but it’s heartening for admins who might otherwise need to stress about de-provisioning users. I’d love to see Whimsical do this — any month I edit a file in Whimsical, charge me $10. If I’m just browsing, don’t charge me.

This aligns the product’s goals with the business goals, driving the team to find find additional use-cases and then educating users on it and going backwareds, helps the organization align features with revenue, potentially leading them to deprecate unused features.