The above title displays, generally speaking, the 3 main monetization methods found in/on SaaS (Software as a Service) websites. Many have asked which are the most efficient to use.
Welcome to my first OCC blog post. I am Victor Bilandzic.
Subscriptions, as implied by the name, are recurring fees, normally monthly or yearly, to use the service or upgrade the account. Subscriptions are most helpful in covering site running costs over time. If a customer cancels their subscription or account after the period has ended, the service should no longer bear the cost of having this user and the customer no longer bears the cost of paying (unlike the one-time fee, whose cost is spread over the life of the product). In the case of OnlineChatCenters, our subscribing customers pay for our costs to host the service and the additional features they subscribe to.
Advertisement-driven sites generally offer their services for free, covering hosting and development expenses through in-software or in-site banner, text, video, and pop-up ads. The online equivalent of local TV channels for you old school money-makers.
One-time purchases are just that – one time add-ons, upgrades, or basic usage. These are considered the least desirable for SaaS sites for they do not pay for the ongoing usage of their site by the consumer. Instead, costs for the LIFE of that user must be calculated into the one-time fee, making them more costly than subscriptions to the customer up front. One-time purchases are risky for SaaS sites at the same time if they price the product too low and are unable to cover costs for the life of their customers. Revenues stop at the first payment, but costs for hosting and development may continue. Charging for updates in the future to cover these further costs also tend to leave a bad taste in customers’ mouths, leaving them asking “how many more updates am I going to have to pay for?” and “is the update really worth it?”
For OCC, we’ve developed a combination of the first two monetization techniques. Free customers are (partially) paid for by our advertisers; in offering 1 user and 1 department for free, we also have the added benefit of killing two birds with one stone by not requiring the added programming and hassle of trial accounts. Upgrades to accounts are done through subscriptions, which can be canceled or renewed at the end of the subscription period. Use the software for as long as you need and cover our expenses to host and develop for you as long as we need: the name of the game. We also have provided the added convenience of prorating any subscriptions you add to your account at a later time so your subscription/expiration date for all features is always the same.
We have purposely excluded one-time purchases to ensure we cover hosting and development expenses for life and ensuring our users always have the most up-to-date version of our services, included in both the free and upgraded packages. The message is one-time purchases, as software moves online and away from local or network hosting, will eventually die. For all soon-to-be or future SaaS sites, consider moving to subscription-based upgrades, advertisements (but delicately keep them out of everyone’s face; future post on in-site no-no’s coming soon) or other ongoing payment options. What other unique payment options are available?
This post was written by Victor Bilandzic.