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4 Reasons to Stick to a Free Plan Model

Posted on May 3, 2018 by

I’ve always been a proponent of keeping as much of your software free for as long as possible. However, in recent years, as Webhose.io has experienced rapid growth, and since a large part of our revenue comes from enterprise sales, I’m increasingly finding myself on the defensive.

I can summarize the objections I hear from fellow entrepreneurs and my own sales and marketing people as follows: “Freemium is for solutions that cost $50 a month. When you’re selling to enterprises, you need to charge upfront to cover your marketing costs. You can give prospects a free trial as part of the sales cycle, but you’ve got to tie it to a commercial discussion.”

Well, I’ve ignored all of this advice for the past 3 years or so, during which Webhose.io has tripled its customers, quadrupled its revenue, and landed deals with awesome companies like Salesforce, IBM and Sprinklr – all despite our decision to stick to a generous free plan, paid plans that start at $50, and keeping even our most expensive plans monthly, rather than requiring an annual commitment.

Here are the 4 reasons Webhose.io is still, and will remain, free to use:

 

1. It’s a matter of principle

This may sound naive, but I didn’t go into the software development world just to make a few bucks, and it’s never been the sole driving force behind the decisions I’ve made throughout my career. Without succumbing to cliches about “making the world a better place”, I will insist that the products you develop should in some way reflect your core beliefs or you’ll bore yourself to death.

For me, one of these beliefs is that information wants to be free. Webhose.io is all about making web content accessible: we give any company and any individual developer access to crawled web data, leveling the playing field with companies such as Google and Microsoft, with their massive crawling infrastructure and historical databases. This was, and is, our mission statement; charging massive amounts of money upfront doesn’t seem like a good way to promote it.

Keeping the product on a free plan model has allowed 5-people startups, academic researchers and independent developers to use the Webhose.io API to build really cool stuff – from identifying fake news to tracking bitcoin transactions on the dark web. Seeing the world at large discover ways to use your platform that you haven’t even thought of yourself is truly awesome.

 

2. Better than any advertising campaign

Moving back to the temporal realm – there is also a very strong business case for going free plan when you look at marketing costs. Unlike most tech startups, Webhose.io is bootstrapped – we chose not to take VC money and instead live off of what we eat. Among other wonderful advantages (which I’ll write about on another occasion), it means you have to be efficient rather than throw a bunch of money around and see what sticks.

Luckily, when it comes to our marketing, we’ve been doing exactly that – the vast majority of our business comes from earned channels such as organic search and referral, rather than paid advertising.

This is not due to some incredible black-magic SEO we’re running – it’s because we’re offering a service developers appreciate, for free. This means more word of mouth, more links being built organically, and more exposure on channels such as Reddit and Stack Overflow – which in turn means high-quality traffic coming to our site, opening an account and contacting our sales team, which we paid absolutely nothing for.

 

3. Happy customers and a stable business

“Enterprise buyers expect to have their hands held throughout the buying process”, say the naysayers, “By sending them to a hands-on free version you’re losing valuable prospects who are giving up when they can’t figure out how to use it.”

There might be some truth to this – although I like to believe this is a rare occurrence, seeing as we have a really awesome support team and are constantly updating our documentation. Still, our main product is an API, and you need to understand some technical concepts like JSON/XML and REST to really benefit from it. Doubtless, some of the people who open an account don’t get the value they expected, and leave.

But… so what? Sure, there’s some money left on the table. But there’s also a lot of money saved by the fact that my sales and support team isn’t working unqualified leads that were never a good fit for our product in the first place; leads that even if we managed to sign, would leave within a month.

Sending people to try the free version before purchasing a paid subscription means your business model isn’t built on fast-talking salespeople, but on delivering actual value through your product. This means higher retention rates. It means your business is ready for a ‘nuclear winter’ – a month or a quarter of bad sales won’t leave a dent, as you have a strong basis of monthly recurring revenue from companies that understand and appreciate your product. And it also means you’re paying less for onboarding and support to keep those customers.

 

4. Good karma and good customer relations

Finally, an excellent reason to keep your product free is that it makes everyone love you that much more.

When you charge people thousands of dollars upfront you’ve also created a major strain on the business relationship from the get-go. There’s a lot of pressure on you as the vendor, and the people on the customer side who made the purchasing decision, to justify the investment. This can lead to bad implementations and mistakes being made in order to show some kind of value ASAP instead of taking the time to build something truly useful.

Allowing customers to start as small as they like – including paying $0 – means that if things don’t work out, they’ll move on with no hard feelings, and no furious online reviews or harm to your reputation. It keeps you on the buyer’s good side from the get-go – especially when you’re selling to a developer audience that’s always suspicious of vendors and their avaricious ways.

For all these reasons – and also because I myself would never buy software without trying it out first – I will continue to insist that software must be free(mium)! You can tell me why I’m wrong in the comments, or check back in another few years to see whether my ideology continued to hold up. Until then, go check out Webhose.io – it’s free

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