> I'm not sure how Christian couldn't have seen this coming
He did. Apollo has a freemium model, and if the API pricing was reasonable, he coult take the hit using the subscribers to subsidize the free users. The problem is the exhorbitant pricing, meaning all his users should be paying four times what the usual suscription costs, just to pay Reddit. It's bonkers.
Realistically, the price he would need to increase to isn't even that high. $5 a month. Paying $5 a month for an app you use daily, repeatedly to the point it makes 300 API requests - isn't asking that much. Would all his users pay? No. But they can use the free Reddit app with ads and what not or the website. But realistically, it's easy to think 5-10% would pay. And he would make a healthy profit and Reddit would get paid.
The problem, everyone seems to think Reddit doesn't provide enough value to be worth $5 a month to enjoy without ads and a nice UI.
Reddit wants about $0,00024 an API request. To think that isn't reasonable, seems odd. Sendgrid wants $0.0399 per email. ScrapingBee wants $0.098 an API request. Docraptor wants $0.4 an API request/pdf. I'm sure I could carry on and find more and more sites that cost more per API request, I didn't find one that was cheaper.
Reddit could just charge its users $5 a month, offer a $10 a month tier for some extra features and co-offers, and keep the API free.
It's a spectacularly stupid move, almost on a par with Musk >50% of Twitter's value and Waves trying to force their customers onto a subscription model by making old versions obsolete.
Reddit will lose a huge number of users, its brand will be trashed, and the app companies will be forced out of business.
This doesn't make sense. Make me, a user of their app and website who sees ads and other stuff pay money so that the API users can avoid them?
Reddit will lose a bunch of deadbeat users, who generate little to no income for the company but cost money to serve. In business, these are the sort of people you don't want.
Who do you think will spend hundreds of millions a year to replace Reddit so that deadbeat users can use it? There would be no money in serving those users and any attempt to serve them and monetize later will result in the same thing that is happening at Reddit. The days of VCs burning money for social networks seems to be over.
And some of the deadbeats are us moderators who invest our time voluntarily to keep the subs tidy, handle the mod queues and answer questions etc. I dive into queue management using the Boost app on my phone durimg breaks away from my corporate laptop, which I won't use for such personal stuff. The official Reddit app is not as good as Boost for moderation.
That's not correct. It's entirely possible they got their on accident. There are engineers in this thread who would know claiming they don't have a real good sense of why things work.
And every big decision they've made has made it worse, not better. Do you use new reddit?
Much more than $5, closer to $10. He still has to afford to live, as he currently does with Apollo's current subscriptions, plus pay reddit's API costs. This is according to his comments on reddit about this situation.
$10/month to use a free website on your phone is just not a very attractive deal at the end of the day.
$2.50 would be the API costs per user. So $5 would cover, take in some money and pay appstore feeds. And if you're looking at 10% of his userbase, that would be about 4 million a month income with 2 million being for Reddit. Based off his claims of 20 million a month with a $2.50 cost per user.
I'm sure he'll be able to survive off $1,000,000 a month profit.
Edit corrected the numbers:
$2.50 a user for API costs.
$5.00 a month subscription would cover that cost.
$1.50 going to AppleTax.
$1.00 a user to the indie hacker
If 5% of users that would cost $20MM sign up for $5 a month it would be $2,000,000 a month overall revenue.
Towards the end of the video (around the last 7min iirc), he explains the business problem in better detail.
He says that he can charge more and still make a living. However, the price change goes into effect July 1st of this year. That’s less than 30 days from now.
The issue is all the current premium users who have 2-12mo left on their subscription suddenly become a huge liability. He cannot suddenly ask for more (against apple rules), and he must not remove features they paid for (apple will issue a refund to them).
I don’t know about the specifics of the business to intelligently critique your calculation, but it couldn’t possibly be the case that somebody turned down an easy million dollars a month, right?
If I was to guess, the standard indie hacker thought is happening "I can't raise prices" and "lots of people don't want to pay". When they're seeing 90% of their user base say I'm not paying that, it's easy to forget the 10% that would. The 10% that would probably haven't even spoken up.
And there is also probably a part of him that doesn't want to be greedy. But is it greedy to sell your software for $5 a month? I don't think so.
Is the 10% based on anything (I figure this is Hackernews so it is non-zero chance that you or someone else knows something about conversation rates for these kind of apps). My gut thinks it is high but I have 0 experience.
10% is a low estimate based on conversion rates I’ve seen people post on conversion rates. Standard apps with freemium the rates are 1-10%, Reddit however is used a lot so a mobile app will be used daily (900,000 daily users out of 1.2 million overall) it already converts at 1.50 a month. It would be somewhat reasonable to think Spotify-conversion rates of 30% would convert.
He did. Apollo has a freemium model, and if the API pricing was reasonable, he coult take the hit using the subscribers to subsidize the free users. The problem is the exhorbitant pricing, meaning all his users should be paying four times what the usual suscription costs, just to pay Reddit. It's bonkers.