Image by PSParro used under Creative Commons License
Pushbullet is an immensely popular multi-platform (Chrome, Firefox, Windows, Mac, Android, IOS) app that allows you to push content from one device to another one (or multiple other ones). As a free service, it quickly became a de facto app on most power-user devices. Watch any technology podcast and you are sure to hear at least one of the hosts talk about it every now and then. It has over 170,000 installs on the Google Play store. Over 1.4M users on the Chrome browser. So by any account it can be considered a success. Except when it comes to profitability.
As a free app, it didn’t make any money and the developers had to assume the charges for all the development and back-end infrastructure.
Through a blog post on the company’s website this week the developer announced that they would launch a free tier at $5 a month ($40 a year). Most users understand that a non-profitable service won’t be around so they don’t mind paying a small fee to keep them going but never hold your users hostage.
What went wrong?
In order to create the Pro-tier and encourage users to become paying customers, they removed functionality from the free product.
They made the announcement November 17, 2015 and the new tier became effective December 1, 2015. They gave their users 2 weeks to decide on what to do.
They chose to charge $5 a month for their service which seems to be more than their customer base is prepared to pay.
Typically Reddit is a good barometer of a company’s biggest supporters / detractors. In this case reading [this] Reddit thread about the changes is enlightening and disquieting for Pushbullet.
The Overcast model
Overcast is my favourite IOS (iPhone and iPad) podcatcher. I bought version 1 as soon as it was released because everything the developer (Marco Arment) releases is fantastic. Overcast v1 was a fantastic app that offered a great feature set (especially at the pro level). In v2, Marco changed Overcast to a patronage model. This means the app is free with its full feature set for everyone, but the developer asks fans to please support him with any amount they feel comfortable with. Why did he do this? Because the 80% of his customers not paying for the pro version ended up with an inferior product.
The LastPass model
LastPass was my preferred password manager until they got acquired by LogMeIn. Their pricing model was to offer customers free access the product on one platform (desktop or smartphone) and then offer a premium tier with unlimited device support and additional functionality. Their base product is solid, secure and extremely competitive as a product. Their premium add-ons like unlimited device support and 2-factor authentication are nice incentives to entice customers to upgrade. Additionally they price the upgrade to $1 per month which makes the upgrade a no brainer for most.
Conclusion
I believe that the Pushbullet approach was ill-advised and crafted by inferior executives that don’t understand the market they are competing in. Even if Pushbullet were to reverse course, there will be “bad faith” held against them for a while. If they maintain their pricing model, they may end up losing too many customers and going under.
The lesson is to know your market and figure out the pricing strategy at the start of your business. Too many internet startups concentrate on “the good idea” and then end up folding or getting sold for pennies on the dollar.