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App.net’s pricing is wrong

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5 October 2012

If you haven’t been living (or at least holidaying) under a rock these last few months of summer, you’ll know about App.net – the strongest Twitter alternative to date. Unlike Twitter, Facebook, Pinterest, and the like, it’s not free. It’s not even cheap. It costs $50 per year to be on App.net.

Until this week, that is.

App.net's pricing model is wrong

App.net has just announced a price drop to $38 per year, and introduced a monthly price model at $5 per month.

This is all brilliant, but we think their pricing model is wrong.

The main aim of App.net is to, against all cost, provide a utility to the user, funded by the user – and make money at the same time. This is a bold deviation from the direction the others take, who basically all turn into ad platforms. App.net’s philosophy is that the ad model works against the principle of providing value to the user. Point taken.

Now, this is where they made a mistake: They started high – undoubtedly to capitalise on early-adopter value – and then reduced their price, because:

The membership of App.net is just about to cross the 20,000 user level, which creates some economies of scale for us. Remember, the original pricing model assumed 10,000 users

We think, however, to stick to their premise – to always be funded by the users, and never by ads – they should’ve ignored the economies of scale, but started by focusing purely on the value they provide to users – making the price directly dependent on the amount of users. The first user should’ve signed up for free, and from then on each user should’ve added a fraction of a cent to the yearly price.

Not only would that help initial growth, but it could also be utilised as a very powerful metric – almost like a listed company’s share price. Except, it can only go up!

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