How to Transition your Web Business from Free to Paid
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The document provides tips on revenue models for online businesses, including suggestions to initially offer products and services for free to gain users and market fit before transitioning to paid options, as well as recommendations around pricing, notice periods, and gradual rollout when moving from a free to paid model based on the experience of the founder of the education marketplace TeachStreet.
How to Transition your Web Business from Free to Paid
- 1. REVENUE MODEL: What is the best way to charge your customers?Dave Schappell - @daveschappell
- 2. Who am I?Founder – TeachStreetAngel-funded / VC-backedFounded in ‘07 – Profitable in ‘11ex-Amazon, JibJabFormer CPANEVER built a profitable business on my own (yet)
- 3. Transform the Lifelong Learning Marketplace49M College Grads / 77M Baby Boomers / 31M Retirees>$30B/year spent by 54M in U.S. taking personal interest classes$5B/year TAM (Marketing, Transaction Fees, Affiliate Sales)
- 4. Why Should You Listen to Me?YouI’veWant to start a (web) business
- 5. Don’t want to go bankrupt
- 6. Think customers will pay
- 7. Aren’t sure how they’ll pay
- 8. Not sure how to find out/testdone thatalmost done thatthought that too (& was wrong)wasn’t positive either
- 9. What Type of Business?DirectIndirectE-commerce
- 10. Subscriptions
- 12. 5 Steps to Business PlanningPlan next 2-3 Years of your BizWhat HAS to come first? - Features, Assets, Office, Employees* Make a Good/Great Product! * What’s your MVP (Minimum Viable Product)?Remove unnecessary itemsCreate a timelineAdd 3-6 months to everything
- 14. Product / Market Fit
- 16. Revenue When?
- 17. Don’t Put Ads on your Site!
- 18. Don’t Worry about Viral
- 19. 5 Tips to TransitionfromFree to PAID
- 20. 5 Tips to go Free to PAIDGive plenty of notice & (real) chance for feedbackPrice it ‘fairly’ (probably still at a deep discount)Offer customers a way to get product for freeProvide Grandfather’d PricingMake transition gradualpeople should only pay if you’re delivering value
- 21. 5 Tips to go Free to PAIDGive plenty of notice & (real) chance for feedbackAs expected, many angry (that’s life…)Some were HAPPY about fees:to reduce clutter/listings from non-serious teacherswe’d be around over long-termwe’d have money to pay for advertising (more students)Learned we weren’t sharing metrics with themFixed this, with better reportingFeature request enable EARNING ‘free’ listings (#3)
- 23. 5 Tips to go Free to PAID2. Price it ‘fairly’ (probably still at a deep discount)$3 = Starbucks Latte!Lasts 30 days, or 10 leads ($0.30 per lead)$3 still expensive vs. Free (Craigslist, WOM)More than just an Ad:SEO benefitsMarketing tools (Craigslist Ads, Flyers)Payments
- 24. 5 Tips to go Free to PAID3. Offer customers a way to get product for freeVirtual Currency – Write Articles / Answer QuestionsLaunched with 5=Free ListingReduced f/5 to 3 & Doubled Content Creation (Iterating!)Win-WinGreat Content is Good for SEO (Traffic)Content helps to merchandise the Teacher (Leads)Lost $3 is minor in the short- to medium-term
- 25. 5 Tips to go Free to PAID4. Provide Grandfather’d PricingOffered 6 month ‘Pro’ pricing for $10 (vs. $30)GOOD - SEOMoz locks Annual Fees of $299 vs. $799BAD – Airlines changing rules for Miles (20k vs. 40k)
- 27. 5 Tips to go Free to PAID5. Make transition gradualpeople should only pay if you’re delivering valueCRITICAL DECISION FOR US!Only force listing payment if Lead Delivered in last 30 daysMaintained our Class Listing Inventory (SEO benefits)Triggered a Payment Decision only with Value (Conversion)
- 28. So, How’s TeachStreet?Launched ‘All Paid’ in late April 2010Pro/Sub Revenue up 56%Listing Fee Rev is now 75% of Pro/Sub RevAnd, it’s 2x’d since May 2010Operational Revenue up >100%Leads to Teachers up 88%
- 29. Timeline to Semi-SuccessJun ‘07 - founded company; raised Angel $Apr ’08 - ~25k classes & teachers in Seattle – teachers could add unlimited classes; students could contact teachers. Limited functionality. Let us demonstrate value & learn (100% free)Apr ’09 - +7 cities; expanded tools (phone tracking, teacher metrics) (100% free)Jul ‘09 - Student-to-Teacher payments. 15 months to launch?!? Believed needed to demonstrate value-add. Students paid small booking fee (to cover costs); Teachers paid commission (still free to add listings)Sep ‘09 - Pro teacher $29.99/month; extra promo, marketing tools, free payments. (still 100% free to add listings; revenues are building from services) Apr ‘10 - optimize/weblab – addt’l lead-tracking – believed we’d never earn biz if didn’t deliver value (more, new students) to teachers (still free to add listings)Apr 7, 2010 - “pre-announce” introduction of fees for all new class listingsApril 27, 2010 - “turned on” listing fees (100% new listings paid; All rev-enabled)May 12, 2010 - last day of $10/month “Pro”-motion (100% new listings paid)At present - Traffic’s growing, Revenue's ramped sharply, and we’re 100% sure that we’re going to have to keep pivoting. Because that’s what startups do.
- 30. Rules We BreakBoth Direct & IndirectSubscriptions & Listing FeesLead-Gen, Affiliates & AdsWe have AdsNot for long?We don’t Weblab/test enoughToo few resources / too many ideas Still are attracted to shiny objects
- 31. ResourcesAndrew Chen – www.andrewchenblog.comDave McClure – 500hats.typepad.comAlyssa Royse – Seattle 2.0 Post(s)My TechCrunch Post on ‘Free to Paid’ http://techcrunch.com/2010/06/13/free-to-paid-tips/Hops & Chops Startup Happy Hour (Thursdays)www.hopsandchops.com