Ask HN: What do you do when a competitor offers their service for free?
This competitor is planning to monetize their user base indirectly, probably valuing them as an email list.
However, I think this service provides enough value alone that people would pay for it. I don't think they realize it, because they are not their own end users (whereas I am building the service based on my own needs).
I'd really prefer not to build my own freemium version to compete with them. I think my service can be slightly better, but a free version would take away most people who would have chosen the cheapest plan.
Anyone have a story that is related?
12 comments
[ 3.7 ms ] story [ 36.5 ms ] threadAll the people who know both products exist .... is probably just you.
If your company fails it'll definitely be because of what you did, not what they do.
If your company succeeds it'll - almost - definitely have nothing to do with anything the other company did.
The same thing happened to me many years ago; I was working on an open source drag-and-drop content management system and I had built the whole thing - Thinking back; it was actually quite good but then, just as I was about to start monetizing; Weebly, Yola, Wix and a bunch of others just came out of nowhere will tons of funding and I had no choice but to give up. You just can't compete with VC money.
You have 2 options; raise VC money or give up and go work for IBM instead; they have a nice cubicle waiting for you.
> go work for IBM instead; they have a nice cubicle waiting for you
I know you're projecting your own frustration, but I think you built a product, not a company. Depending on your mixture of customers, service (not necessarily the same thing as the product), and narrative, it's quite possible to remain very competitive. (The company I work for, which was bootstrapped, is very competitive despite funded competitors)
And of course, the likelihood that your average customer even knows there are two competing solutions is low.
It all boils down to: be better than your competition. Price is not the only factor.
I wrap/resell Route53 DNS hosting from Amazon, and while I don't have millions of customers I think I gain from flat-pricing, and a less complicated webconsole/interface. I still require technical clients (who can use git), but I don't require dealing with credentials and AWS tools.
I make a living selling a database client I've developed over the last couple of years. In that time, a few other products showed up in the same space, ranging from free apps to venture funded SaaS, but it didn't seem to affect my revenue.
My revenue went up when I released a major new version or added important features. But the release of a competing free app -- nobody seemed to care about that.
Perhaps the best advice is from Michelle Obama: "When they go low, we go high"
Consider aiming for high end users in your market, then you need far fewer customers to generate a decent wage.
For example if you charge 49 vs 9 then you need 5 x less costomers to hit your paycheck.
Just be sure to validate with real customers that the market can bear the price point you need.
Brilliant appropriation.
The message you need to worry about is almost certainly not "Why you should spend money on my product instead of getting theirs for free." The message you need to focus on is why people should want your product at all. In fact, before you get to that stage, your message may need to be as simple as "We exist."
This was the marketing goal of Aflac's initial duck commercials. They were a little known insurance company with low name recognition. They tested two commercials. One was a more respectable, conservative commercial. It achieved around 40% name recognition, which was the industry standard and would have been a big improvement. The second achieved 90% name recognition, but was a silly duck making fun of the sound of the name. It was considered hugely risky, but the CEO latched onto the 90% name recognition metric and went with that campaign.
After becoming a household word, they changed their marketing campaign goal to trying to educate people about their product. It was poorly understood as to how it differed from other insurance products. Yet, they were already a Fortune 200 company because everybody at least new their name and that they existed.
Cart and horse and all that.
Outcompete them on quality. Pretty simple. And don't forget that you don't compete with each other. You compete with being considered irrelevant.
If it's the same service, then who is right about the better business model. You think this service provides enough value that people will pay for it, this competitor thinks free is better, who is right? who is more right?
Sometimes business models change (ask newspapers) or competitors force you to take a loss/make changes on things you would rather not. This is business. Hopefully not, but you might have to build that freemium version for the short term and figure out a way to add better price discrimination to it.
How much market research have you done? Entrepreneurs building for themselves have a huge advantage but are also often most likely to not do enough market research, assuming many others out there think just as they do.