Wednesday, 9 November 2016

New pricing model: premium users are no longer paying for free users

TL;DR our pricing model is changed from freemium (free + premium) to trial + premium. New premium fee is $1.99 per year per device.  You are right, that's an annually price.

What's wrong with freemium model?


Freemium model seems to be the de facto standard pricing model nowadays. The benefits are clear:

  • it's usually easier to convert a premium user in two phases than directly from a stranger
    1. convert a new user to setup a free account
    2. upgrade a free account to a premium account
  • you get free marketing when ppl lower their expectation on free services
We bought this philosophy initially, so Just Proxy was launched with freemium model. It indeed helped a lot at the beginning by attracting lots of installs. But the natural free to premium conversion is just too low to make the whole model sustainable.

Let's do the math, assuming the free to premium conversion ratio is 1/1000 for a newly launched app (it's not our number but not far off). This is not scalable at all, I can hardly imagine any service would break even with 0.1% users paying for the rest 99.9%. This is extremely true for VPN industry, when bandwidth and servers are still expensive. 

What are the options?


We discussed a few options:
  1. Increase the premium membership fee. Until today we are charging $5/month, or $50/year. This is slightly cheaper than our competitors. But given we are rated (4.72/5.0) higher than our competitors, can we try to increase our fee for a better service?
    • Rejected: with the raised premium charge, we might end up having even less premium users (say 1/5000) paying for the rest (say 4999/5000), then shall we raise again? On the other hand, do we really want to rip off a group of people but actually spend the money on another group? 
  2. Increase the free to premium conversion ratio. 
    1. Throttling network speed for free users
      • Rejected: we are harming 99.9% users experience simply to make that 0.01% looks more compelling? 
    2. Prompt premium plan more aggressively, like extension popover, email etc.
      • Rejected: our ultimate goal is to make a VPN that just works. It should be something start-and-forget. All the complexities should be handled seamlessly in the background. This approach is against our goal. 
  3. Introduce advertisements
    1. extension ads
      • Rejected: same as 2-2. With extension ads, we would inevitably complicate the operations to get more ads presences. This is fundamentally against our goal to make a perfect VPN app. 
    2. inject ads to the page by replacing existing ads or content with ours
      • Rejected: this is harming website's benefit. They are already getting the traffic but ends up showing someone else's ads. I wonder it might even be illegal in some countries. We discussed this option because some of our biggest VPN competitors are surprisingly doing this. 
So what are the other options?

Our new pricing model

The new pricing model is very simple. All new installs are given one hour trial, and then $1.99 per year per device for unlimited access. By unlimited we mean:

  1. no location limitation. You can freely access all 18 locations instead of 3. 
  2. no speed limitation. Feel free to stream 1080p videos.
  3. no time limitation. You can keep the extension on 24 x 7 if you like.
  4. no total bandwidth usage limitation. 
And again, $1.99 is for a whole year. When a premium user is only paying for his/her own usage, the total fee can actually be reduced from $5/month to $1.99/year.  Although Paypal is charging even more on small amount transactions, we anticipate healthier financial conditions with the new plan. 

What about existing users?

Thanks for all the early adopters, we won't be able to improve so much without your timely feedback.

All existing free users can enjoy the trial until the end of November (instead of one hour), and then decide whether they want to

All paid users can request refund anytime and re-join with the cheaper plan. There is no more 14 days money back limitations for for any plans started on or before Nov 9th.

Any questions feel free to write to justproxy.crx@gmail.com. We actually monitor this address.