Consumer software is dead. Long live consumer software.
In the coming years, expect to see a weird change in consumer and enterprise software.
Consumer software will become less user friendly than enterprise software. It’ll be a weird flip, as enterprise software has historically been rife with pain. But they will trade places soon. Why? Consumer software can’t make money for indie developers anymore.
“What do you mean, Alex?” I hear someone saying. “But it’s so lucrative! I read yet another success story on Hacker News just the other day!”
Check out the second highest comment from the launch of Milanote (an awesome freemium notes app) on HackerNews, emphasis mine:
Hm, no, simply cannot afford 144$/y for another cloud note system. Please, we need this: Note taking done right: Android, iOS, Desktop, Markdown & HTML & Pictures, easy flat file format (preferred markdown), Web clipper, archive notes, offline and do this all without wasting whitespace (no document editor like Evernote) and good sync and instant search results while you type. <- would spend a bigger double digit number $ on this, but no subscription. Closest I’ve found is Google Keep.
Damn! That’s a lot of requests.
But let’s say you do launch a one-time paid app. You’ll still get the same response, like the top response to this launch of a one-time-paid $10 multiplatform task app on Product Hunt:
10$ for a task app…cmon use trello or reminders…
Say you have a team of 3 with modest salaries, add in a couple thousand dollars a month for the business (hosting, rent, SaaS apps, etc.), and taxes, and it could easily cost $20k a month. In the enterprise world, this is nothing.
In the consumer world, where users are demanding every feature under the sun, and lower prices, what would it take?
If everyone was paying $2 / mo, it would take 10,000 users. Just to break even.
But let’s be honest — when a consumer says they’d pay at a lower pricepoint they usually wouldn’t. Most often, they would say this unless it was free.
So startups go with freemium, thinking this is what the consumers demand, and they claim they’ll eventually pay for it.
So let’s say we’re going to charge $5 per month for a “pro” offering. And let’s say an industry norm of 3% of users upgrade to the pro tier.
To hit $20k, you would need 133,000 total users.
If your website converts at 8%, you need 1.6 million visitors to your website to hit that number. Sounds attainable… it’s only half of Tublr’s monthly active users.
More realistically, let’s say you can bring in 10,000 visitors a month to your website on average. At a conversion of 8%, you’d be getting 800 new customers a month. And let’s say your product is so amazing you have no churn at all. It would take you over 13 years to have your first “profitable” month (but that profit would presumably need to go straight into paying for 13 years of losses).
The numbers just don’t work out for most indie developers. A lucky few will hit the numbers necessary.
I love building great consumer apps, but unfortunately, the business model just isn’t there. I hope things like Setapp might change the game, but even if they’re successful, it doesn’t bode well that that model hasn’t worked out for musicians on Spotify.
In fact, it’s the same thing happening to plenty of consumer-facing creators like musicians. Indie musicians aren’t making the money they need to produce the things they do for their fans. Why? No one wants to pay for music anymore.
I’m guilty of all of this too! It’s just that consumers can’t take on large monthly recurring expenses the way businesses can. Businesses expect it, it’s a normal part of doing business. And if spent wisely, they could expect every dollar spent on recurring software to have some meaningful return (2x? 5x? 10x?) on their revenues.
For individuals, this isn’t the case. Spending $10 a month on Hulu won’t help increase their income, it’ll only chip away at it.
Consumer software will waver. As enterprise software is growing bigger and better, consumer software is growing smaller and worse: doing less, and doing a worse job of it. Meanwhile some of the best enterprise software is some of the best product and business design we’ve seen in a long time, and they’re expanding to do more. Look at Stripe, Baremetrics, Intercom, Mailchimp, etc. These companies win by doing more. In consumer software, it seems the only way to win is by doing doing less, so you can manage to get done what you can afford to in a small amount of time.
Consumer SaaS was dead on arrival. One-time-paid consumer apps were once a good money-maker, but that gold rush has ended. And freemium is impossible without scaling to astronomical numbers, as illustrated in the above example. This is why we’re not offering freemium anymore, and why most of the founders I interviewed for Founder Thunder Round have moved away from freemium as well (read more I learned from them here).
“But Alex, aren’t you working on a reboot of your email app, Mail Pilot, right now?”
Yes, yes I am. Don’t worry — it’s not going subscription, so feel free to extinguish your torch now.
Where do we go with Mail Pilot’s business model?
I really like what Sketch has done, and it sounds like consumers do too. You pay $99 for the app, and you get 1 year of free updates. It’s the best of both worlds. But supporting that business model is impossible on the Mac App Store, so that’s a no-go for Mail Pilot.
I also get plenty of messages from folks (not nearly as many, of course), saying they would prefer Mail Pilot be subscription-based. Sounds shocking, doesn’t it? These individuals tell me they are concerned about Mail Pilot’s longevity and sustainability. They would rather pay a subscription for a great email app that will stay in active development for a long time, instead of a one-time paid app that slows down just when it gets good because all the revenue dried up shortly after launch.
And I can’t blame them — Mail Pilot hasn’t been in active development for well over a year. They want it back, but they want to know it’s not going anywhere this time.
This calls for a little experimentation. How do I find a way for the one-time-paid-or-bust super majority to be able to buy Mail Pilot just like they always have, but also find a way to make Mail Pilot more sustainable with the support of the minority concerned about the longevity of the product that would prefer a subscription-based product?
The idea I’m toying with is inspired by Marco Arment’s “crazy new business model” in which users can pay a monthly donation if they want to support the ongoing development of their favorite podcast player, Overcast.
Here’s how it would work: Customers could still buy Mail Pilot outright for its regular one-time paid price, and be totally good to go. No changes here at all — this would be the exact same as it has always been.
But, much like Overcast, if someone wanted to pay a monthly subscription to support the ongoing development of Mail Pilot, they could. These folks would be a part of the Mail Pilot Yacht Club and would have access to the Mail Pilot Discovery Edition — a beta of the app with all the cutting-edge exploratory features I’ve always wanted to test out to see which ones really boost users productivity. Mail Pilot’s biggest fans and supporters would get access to these features and help us shape them based on their experiences.
It’d be an experiment, for sure. But if just 5% of our users opted to be a member of the Mail Pilot Yacht Club, it’d be smooth sailing — we could fund all the ongoing development of Mail Pilot we need.
Plus, it wouldn’t just be a donation. Members would get access to the latest and greatest innovations in email productivity; tomorrow’s stuff today.
It’s one of a handful of ideas we’ve tossed around, and the one I’m most curious to see how it would be received.
Consumer software is the most rewarding for me as a product designer, but certainly the least lucrative. It has gotten to the point where most consumer software is not sustainable for indie developers. Hopefully, with a little experimentation, a little support from the fanbase, and some luck, when we launch the reboot of Mail Pilot, we can help pave the way for finding a path to sustainability for indie developers.
Long live consumer software.