Possible membership fee increase

Jeremy Howard · 25 Mar 2002, 11:46 AM

As most of you know, our prices are set such that we cover the costs of free users by adding a profit margin to Full and Enhanced subscriptions, and memberships are designed to basically cover their own costs, plus enough margin to cover development costs if we reach certain growth targets.

This has been working fine to date. However the recent influx of Yahoo users have been much less likely to take paid accounts than previous users. This means that for the numbers to add up we may have to increase the membership fee to $13.95 or $14.95, which of course is still a one-off fee and is a very good deal compared to what the competition is offering.

This won't affect existing members if we decide to implement this pricing change of course. However I know that some people here are holding off upgrading for various reasons so I wanted to give you warning to let you beat the potential price rise.

We haven't yet made a final decision on this--Rob and I will be doing so in the next 12 hours or so. However I wanted to flag the possibility here so that those of you looking at becoming a member shortly can ensure that you get in at the lower price.

This potential change in price for member accounts would not affect full or enhanced subscribers at all. Because membership is a one-off cost, we will change the price from time to time as business conditions change. However full and enhanced subscriptions have ongoing charges, so we plan to keep these price points constant.

**psalzer** · 25 Mar 2002, 12:08 PM

I'd like to pay for my son's member level account now, since I know he's not going to get around to it in the next week or so and we might as well get in ahead of the price increase. I know I can give him a gift certificate, but what does he have to do after that to upgrade to member?

Jeremy Howard · 25 Mar 2002, 12:23 PM

If you know his username, you can actually send yourself a gift cert. You'll receive it immediately, and it will contain a hyperlink. Click the link, and you will be asked what account to credit. Type in the name of your son's account.

Then, your son needs to log in, click Preferences, click Upgrade, and select Member. When he clicks the 'Upgrade' button the system will explain that there are already funds in the pool, and will ask for confirmation that they should be used to upgrade.

Should be simple enough even for a musician!

**psalzer** · 25 Mar 2002, 12:31 PM

Wow..you remembered he's a musician. That's amazing. Well.. I don't know..this musician is having a stressed out time...too much going on, which is why he won't remember to upgrade. I figured I'd do it for him, which means I also have to pay for my daughter's account, cause that's only fair. But she'll be getting a full account so I can do hers later. OK..send myself a gift card..going to do it now..

Heartz · 25 Mar 2002, 01:01 PM

I like the honourable way you guys are doing stuff. This warning is excellent and I would say most companies would never do such a thing.

Keep up the good work.

Heartz · 25 Mar 2002, 03:13 PM

Just one thing I'm worried about. Will the price of Bandwidth and Storage also be included in the increase ? I've been wanting to buy more storage, but have been waiting for you guys to start offering it in smaller blocks. I was just wondering if these items would be affected in the price increase.

Thanks.

erimess · 27 Mar 2002, 12:01 PM

Quote:

Originally posted by Jeremy Howard
This has been working fine to date. However the recent influx of Yahoo users have been much less likely to take paid accounts than previous users. This means that for the numbers to add up we may have to increase the membership fee to $13.95 or $14.95, which of course is still a one-off fee and is a very good deal compared to what the competition is offering.

This won't affect existing members if we decide to implement this pricing change of course. However I know that some people here are holding off upgrading for various reasons so I wanted to give you warning to let you beat the potential price rise.

Hehe. Like me.

My only question would be whether this would take place before or after April 18th. (Is that the right date?) That's kind of really all I'm waiting on. And I don't have time right now to play around as much as I would like, to get a better idea of what all the features are, etc. etc. I'm actually considering Full at this point in time.

Jeremy Howard · 27 Mar 2002, 12:23 PM

We have decided to go ahead with the increase. It's likely to happen in the next couple of days.

unhappysoul · 27 Mar 2002, 01:57 PM

Ha~ha~!!! ( Quote from Nelson of Simsons )

Good think I signed up for "MEMBER" accout just 5 days ago!

Otherwise I might paid higher ( but still cheaper ) membership!

Man!, this made my day!!!!!!!!!!!

Rahul Sonnad · 27 Mar 2002, 02:04 PM

Here's my 2 cents which you can dispense with as desired:

I'm wondering why you are choosing to make "members" subsidize free users.

Why do you want free users? Because they will convert to/recruit paying customres at some point? Well if that is the case then you don't really need to charge more, other than to cover a short term cash-flow problem. However, If you don't think they're going to convert in sufficent %, then why do you want them at all?

What I would hate to see is fastmail go through the growing pains that a lot of other services have experienced when they have a great service for free and too many moochers join on and the business model never materializes.

It seems to me that if there are too many free users some better options might be:

1) Give free users much less resources/features (i.e. IMAP/POP, bandwidth, storage, etc...)

2) Make it free for 6 months only.

3) Not have free users, and maybe have a $3 guest membership. I know that the credit card company would eat a chunk of this, but it will at least qualify your customers into the kind that would pay and likely give you a much higher conversion rate.

4) Let paying users who beleive in the model cover the cash shortfall, but get rewarded later. Maybe you could charge $14 but give a $5 credit after 6 months, that could be used to buy extra storage, etc... Or if the conversion numbers are higher than expected, give a $10 credit.

5) Just threaten to increase the price to encourage conversion, but never really do it.

Just some thoughts.
- Rahul

***Edwin*** · 27 Mar 2002, 02:26 PM

In my view, two things may be worth looking at:-

A) Reducing somewhat the features offered to free users, until the service is still better than other free offerings, but not head-shoulders-knees-and-toes better.

B) Do away with any membership level that involves a once-only payment (except for grandfathering existing members, of course!) since from then on the members are in the "cost" column of the balance sheet forever (and since Members have no ads included, they won't be bringing in new users)

So the new levels might be:-

A) Free (but with greater restrictions and/or less features)...
B) Member at e.g. $9.95 per year
C) Full (same as now)
D) Enhanced (same as now)

Jeremy Howard · 27 Mar 2002, 02:29 PM

Hi Rahul. Thanks for your suggestions. We're not actually having any 'growing pains'. We have a very robust cash-flow model and track our results closely. All that has happened is that our conversion rate to paid accounts has changed in the last week; the people coming across from Yahoo are not upgrading at the same rate as other users have been. Our cash flow model shows us that we need to increase the membership fee for our projections to be maintained.

It's not that we actually have a cash shortfall. We've got a plenty big enough slack to cover major changes in behaviour. It's that our cash-flow model shows that the current profile may not be profitable, which in the long-term will cause a problem.

As you say, reducing free user benefits is another option, but I'd rather not change anything that negatively impacts current users. Maybe in 3 months time we'll find that upgrade rates have reverted to earlier levels, and maybe at that time we'll change the membership fee again. The nice thing about changing the membership fee is that it's easy to do and doesn't affect existing customers.

I don't want to remove free accounts unless it becomes absolutely necessary. I don't see that happening. Our revised membership fee is still extremely good value compared to our competitors, so at this stage I consider this a better option.

To clarify: FastMail.FM's business model is working. Our signup rate until last week was meeting our projections almost exactly. Our revised membership fee simply reflects a recent change in the competitive environment.

unhappysoul · 27 Mar 2002, 02:59 PM

Just quick suggestion (???)

Since price of membership is slitely going up how about dropping

minimum required userid characters from current 5 letters to

4 letters??????

Just wondering if that is possible.......?????

4 MORE YEARS!!!! .. I mean,

4 LETTER WORD !

4 LETTER WORD !

***Edwin*** · 27 Mar 2002, 03:05 PM

IMO, by easing the username character restriction, you'd be narrowing the perceived gap between the Member and Full service level... which would have exactly the opposite effect to what the Fastmail team is trying to accomplish!

Jeremy Howard · 27 Mar 2002, 03:14 PM

We're not changing the username limit. But we do have some nice new features for members that we'll be announcing in the next week or two...

25 Mar 2002, 11:46 AM	#1
Jeremy Howard Ultimate Contributor Join Date: Sep 2001 Location: Australia Posts: 11,501	Possible membership fee increase As most of you know, our prices are set such that we cover the costs of free users by adding a profit margin to Full and Enhanced subscriptions, and memberships are designed to basically cover their own costs, plus enough margin to cover development costs if we reach certain growth targets. This has been working fine to date. However the recent influx of Yahoo users have been much less likely to take paid accounts than previous users. This means that for the numbers to add up we may have to increase the membership fee to $13.95 or $14.95, which of course is still a one-off fee and is a very good deal compared to what the competition is offering. This won't affect existing members if we decide to implement this pricing change of course. However I know that some people here are holding off upgrading for various reasons so I wanted to give you warning to let you beat the potential price rise. We haven't yet made a final decision on this--Rob and I will be doing so in the next 12 hours or so. However I wanted to flag the possibility here so that those of you looking at becoming a member shortly can ensure that you get in at the lower price. This potential change in price for member accounts would not affect full or enhanced subscribers at all. Because membership is a one-off cost, we will change the price from time to time as business conditions change. However full and enhanced subscriptions have ongoing charges, so we plan to keep these price points constant.

27 Mar 2002, 01:57 PM	#9
unhappysoul Cornerstone of the Community Join Date: Mar 2002 Location: Los Angeles, California Posts: 504	Ha~ha~!!! Ha~ha~!!! ( Quote from Nelson of Simsons ) Good think I signed up for "MEMBER" accout just 5 days ago! Otherwise I might paid higher ( but still cheaper ) membership! Man!, this made my day!!!!!!!!!!!

27 Mar 2002, 02:04 PM	#10
Rahul Sonnad Junior Member Join Date: Mar 2002 Location: Seattle Posts: 11	Subsidizing Free Users Here's my 2 cents which you can dispense with as desired: I'm wondering why you are choosing to make "members" subsidize free users. Why do you want free users? Because they will convert to/recruit paying customres at some point? Well if that is the case then you don't really need to charge more, other than to cover a short term cash-flow problem. However, If you don't think they're going to convert in sufficent %, then why do you want them at all? What I would hate to see is fastmail go through the growing pains that a lot of other services have experienced when they have a great service for free and too many moochers join on and the business model never materializes. It seems to me that if there are too many free users some better options might be: 1) Give free users much less resources/features (i.e. IMAP/POP, bandwidth, storage, etc...) 2) Make it free for 6 months only. 3) Not have free users, and maybe have a $3 guest membership. I know that the credit card company would eat a chunk of this, but it will at least qualify your customers into the kind that would pay and likely give you a much higher conversion rate. 4) Let paying users who beleive in the model cover the cash shortfall, but get rewarded later. Maybe you could charge $14 but give a $5 credit after 6 months, that could be used to buy extra storage, etc... Or if the conversion numbers are higher than expected, give a $10 credit. 5) Just threaten to increase the price to encourage conversion, but never really do it. Just some thoughts. - Rahul

27 Mar 2002, 02:59 PM	#13
unhappysoul Cornerstone of the Community Join Date: Mar 2002 Location: Los Angeles, California Posts: 504	4 Letter Word ??? Just quick suggestion (???) Since price of membership is slitely going up how about dropping minimum required userid characters from current 5 letters to 4 letters?????? Just wondering if that is possible.......????? 4 MORE YEARS!!!! .. I mean, 4 LETTER WORD ! 4 LETTER WORD !

25 Mar 2002, 12:08 PM	#2
psalzer Moderator Join Date: Dec 2001 Location: Long Island, NY Posts: 2,654	I'd like to pay for my son's member level account now, since I know he's not going to get around to it in the next week or so and we might as well get in ahead of the price increase. I know I can give him a gift certificate, but what does he have to do after that to upgrade to member?

25 Mar 2002, 12:23 PM	#3
Jeremy Howard Ultimate Contributor Join Date: Sep 2001 Location: Australia Posts: 11,501	If you know his username, you can actually send yourself a gift cert. You'll receive it immediately, and it will contain a hyperlink. Click the link, and you will be asked what account to credit. Type in the name of your son's account. Then, your son needs to log in, click Preferences, click Upgrade, and select Member. When he clicks the 'Upgrade' button the system will explain that there are already funds in the pool, and will ask for confirmation that they should be used to upgrade. Should be simple enough even for a musician!

25 Mar 2002, 12:31 PM	#4
psalzer Moderator Join Date: Dec 2001 Location: Long Island, NY Posts: 2,654	Wow..you remembered he's a musician. That's amazing. Well.. I don't know..this musician is having a stressed out time...too much going on, which is why he won't remember to upgrade. I figured I'd do it for him, which means I also have to pay for my daughter's account, cause that's only fair. But she'll be getting a full account so I can do hers later. OK..send myself a gift card..going to do it now..

25 Mar 2002, 01:01 PM	#5
Heartz Essential Contributor Join Date: Feb 2002 Location: Selangor, Malaysia Posts: 460	I like the honourable way you guys are doing stuff. This warning is excellent and I would say most companies would never do such a thing. Keep up the good work.

25 Mar 2002, 03:13 PM	#6
Heartz Essential Contributor Join Date: Feb 2002 Location: Selangor, Malaysia Posts: 460	Just one thing I'm worried about. Will the price of Bandwidth and Storage also be included in the increase ? I've been wanting to buy more storage, but have been waiting for you guys to start offering it in smaller blocks. I was just wondering if these items would be affected in the price increase. Thanks.

27 Mar 2002, 12:23 PM	#8
Jeremy Howard Ultimate Contributor Join Date: Sep 2001 Location: Australia Posts: 11,501	We have decided to go ahead with the increase. It's likely to happen in the next couple of days.

27 Mar 2002, 02:26 PM	#11
*Edwin* Administrator Join Date: Aug 2001 Location: UK Posts: 3,118	In my view, two things may be worth looking at:- A) Reducing somewhat the features offered to free users, until the service is still better than other free offerings, but not head-shoulders-knees-and-toes better. B) Do away with any membership level that involves a once-only payment (except for grandfathering existing members, of course!) since from then on the members are in the "cost" column of the balance sheet forever (and since Members have no ads included, they won't be bringing in new users) So the new levels might be:- A) Free (but with greater restrictions and/or less features)... B) Member at e.g. $9.95 per year C) Full (same as now) D) Enhanced (same as now)

27 Mar 2002, 02:29 PM	#12
Jeremy Howard Ultimate Contributor Join Date: Sep 2001 Location: Australia Posts: 11,501	Hi Rahul. Thanks for your suggestions. We're not actually having any 'growing pains'. We have a very robust cash-flow model and track our results closely. All that has happened is that our conversion rate to paid accounts has changed in the last week; the people coming across from Yahoo are not upgrading at the same rate as other users have been. Our cash flow model shows us that we need to increase the membership fee for our projections to be maintained. It's not that we actually have a cash shortfall. We've got a plenty big enough slack to cover major changes in behaviour. It's that our cash-flow model shows that the current profile may not be profitable, which in the long-term will cause a problem. As you say, reducing free user benefits is another option, but I'd rather not change anything that negatively impacts current users. Maybe in 3 months time we'll find that upgrade rates have reverted to earlier levels, and maybe at that time we'll change the membership fee again. The nice thing about changing the membership fee is that it's easy to do and doesn't affect existing customers. I don't want to remove free accounts unless it becomes absolutely necessary. I don't see that happening. Our revised membership fee is still extremely good value compared to our competitors, so at this stage I consider this a better option. To clarify: FastMail.FM's business model is working. Our signup rate until last week was meeting our projections almost exactly. Our revised membership fee simply reflects a recent change in the competitive environment.

27 Mar 2002, 03:05 PM	#14
*Edwin* Administrator Join Date: Aug 2001 Location: UK Posts: 3,118	IMO, by easing the username character restriction, you'd be narrowing the perceived gap between the Member and Full service level... which would have exactly the opposite effect to what the Fastmail team is trying to accomplish!

27 Mar 2002, 03:14 PM	#15
Jeremy Howard Ultimate Contributor Join Date: Sep 2001 Location: Australia Posts: 11,501	We're not changing the username limit. But we do have some nice new features for members that we'll be announcing in the next week or two...