Monetizing The Unmonetizable

Steve Ridout’s write-up about bootstrapping Readlang highlights a common problem for bootstrappers: you’ve built something that’s relatively popular, yet you can’t seem to find a way to earn a living from it.

You see, it’s easy to drink the startup kool-aid and think that all you need to do is “make something people want”. But that applies to startups, i.e. venture-backed businesses that can throw money at an idea to make it grow (and then either A) get bought out, B) become ad-supported or C) die a miserable death).

If you’re a bootstrapper, the full quote should actually be “make something people want enough to pay for”.

The problem of course is that “people” don’t like paying for stuff, especially if we’re talking about consumers, not businesses. So you often end up in Steve’s situation: with a popular product that users love, but unable to bridge the gap to profitable business (“profitable” meaning you’re earning at least as much as you would with a regular software developer job).

So let me review a few ideas of how bootstrappers like Steve can square that circle, and maybe find a path to a more profitable business model.

Raise Prices

The most obvious solution would be raising the subscription fee for the premium version from the current $5/month to something like $30/month. Even if you lose 80% of your paying customers, you’ll still end up making more money than before.

Essentially, raising prices means transitioning from a “spread-out” model where a relatively large portion of your users pay a small fee, to the “whale” model favoured by free-to-play games where a small number of profitable users support everybody else.

Of course, I suspect the reason the Premium version is so cheap to begin with is that Steve doesn’t think the market would support a higher price point. He might be wrong, but it’s also possible that the Premium version’s current feature set is just not that attractive for the average Readlang user.

Target Enterprises/Schools/etc.

Another popular suggestion for struggling bootstrappers is “have you thought about selling to enterprises/schools/governments/insert-random-large-organization-with-lots-of-money?”

While this can seem like an attractive proposition, it’s easier said than done. Selling to organizations is a whole other ball game, and it might be hard to justify the much higher price tag that you’ll need to warrant spending hours (or days) on each individual sale. And finally, there’s also the issue of splitting your focus in two.

So I might be wrong, but it seems to me that successful enterprise products tend to be those that target enterprises from the start, not those that start pivoting towards that market once the cash runs out.

In fact, it turns out Steve agrees:

I developed some features to target at teachers managing a class of students: http://blog.readlang.com/2014/02/12/readlang-for-teachers.ht.... I got a bunch of teachers using it with real classes but decided to abandon the idea because: 1. The response was positive but usage wasn’t what I’d hoped. 2. Focus. As one guy I’ve got enough on my plate making an awesome product for self motivated individuals. Diluting my focus and the focus of the product seems like a very bad idea.

Charge A One-Time Fee

The software industry has an unhealthy obsession with recurring fees. Everybody wants to be the next Basecamp, and charge $10 to thousands of customers for the rest of their lives.

But guess what: customers hate recurring fees. Every time I go through my credit card bill, I look at each item wondering if I can drop it or not. And whenever I see how much money I’m forking over to MailChimp, I don’t think about their cute furry little mascot. Instead, I fantasize about the day where I can replace them with my own custom email server and stop them from bleeding my dry every goddam month.

Recurring fees are a liability. But one-time fees are an investment. Sure, I’m spending $X00 on this app today. But I’m going to use it so much that I’ll get my money’s worth in no time.

So Readlang could switch to a one-time $48 payment to unlock all premium features for life. Put another way, this is like getting a one-year payment upfront for every single new customer.

Sure, that payment won’t renew at the end of the year. But then again, with monthly payments the customer can cancel after two or three months. Hacker News jakobegger put it perfectly:

Sounds like your product is a poor fit for a subscription. If the majority of your revenue is from new customers, why not switch to a paid-up-front product? With a 20% churn rate, your average revenue per user should be around 25$, so why not just charge $25 up front?

Launch A Complementary Product

Finally, rather than monetize a single product at all cost, sometimes it’s just easier to build a spiderweb of complementary products and only monetize some of them.

I’m sure Steve knows a lot about language learning by now. Why not write a book or film a series of screencasts about the best language learning tools? Or maybe launch a daily deal site focused specifically on language learning apps?

The key thing here is that by targeting the same market as Readlang, Steve could piggy-back on the audience he’s already built, without having so start from scratch in a completely different market.

And once you have a good complementary product, you can optionally make your first product completely free. This will not only increase its virality, but also free up the time you were spending on sales and customer support.

Of course, this strategy too suffers from the split focus issue. This is why it’s important to create a complementary product that requires a relatively smaller amount of work, if at all possible.

Conclusion

Bootstrapping a consumer product is probably one of the hardest spots to be in on the Product Spectrum.

The fact that Steve managed to get almost 40,000 people to sign up in 2015 is already huge. I personally have yet to launch anything that achieves anything close to that level of popularity.

Sadly, popularity alone is not enough to make it in the world of bootstrapped businesses. So here’s hoping that Steve can make things work for Readlang in 2016!

Now if you’ll excuse me, I have some Japanese to learn, and a Chrome extension to install.