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Most of the money in SaaS is in large clients in the enterprise. Almost all large SaaS businesses have been built that way (Salesforce, Adobe, ServiceNow, Workday). Once you figure that out monetizing smaller companies goes way down in priority and it's a better strategy to give your product away for free.
For us in particular:
1) It was a great way to grab attention from Mixpanel and others in a crowded market.
2) A lot of those companies become large customers over time when their needs become bigger and more complex. Doordash, Instacart, and Rappi all started out that way and are now huge customers.
3) A lot of those companies and people at those companies get acquired by larger companies over time. Under Armour, Capital One, and Twitter were all companies where Amplitude was brought in through acquisition of a smaller company.
4) It's not that expensive relative to your overall cost base. I believe 8% or so of our server costs go to our free plan, which is significant, but worth it.
We've never received pressure to do that, our venture capital shareholders are very aligned towards winning the market over the period of decades. We did get some stupid (IMO) questions about gross margin as we went public but no one ever gets down to the level of messing around with your pricing plan and free tier. If we were owned by private equity though it'd be a very different story. Those guys are experts at wringing blood from a stone.
To be fair Adobe IPO'd in 1986, long before SaaS was a thing. I wouldn't say they quite fit the bill of "built by selling large enterprise software contracts".
I would. Back in 1986, enterprises paid for Adobe software (paid a lot) and everyone else pirated it. Piracy was the free tier -- you'd pirate it as a student or small business, then pay as you either got a job at a big company or turned into a big company.
I agree. Even at the small agency I worked as an intern, all Photoshop's were pirated. Not cracked but same serial with no online checking. Licensing for small companies wasn't a thing until online verifications became a thing.
Yes, but they later pivoted into SaaS and have gone on to dominate enterprise CMO budgets. It's one of the most impressive business model changes by a large company.
Most of the money in SaaS is in large clients in the enterprise. Almost all large SaaS businesses have been built that way (Salesforce, Adobe, ServiceNow, Workday). Once you figure that out monetizing smaller companies goes way down in priority and it's a better strategy to give your product away for free.
For us in particular: 1) It was a great way to grab attention from Mixpanel and others in a crowded market. 2) A lot of those companies become large customers over time when their needs become bigger and more complex. Doordash, Instacart, and Rappi all started out that way and are now huge customers. 3) A lot of those companies and people at those companies get acquired by larger companies over time. Under Armour, Capital One, and Twitter were all companies where Amplitude was brought in through acquisition of a smaller company. 4) It's not that expensive relative to your overall cost base. I believe 8% or so of our server costs go to our free plan, which is significant, but worth it.
We've never received pressure to do that, our venture capital shareholders are very aligned towards winning the market over the period of decades. We did get some stupid (IMO) questions about gross margin as we went public but no one ever gets down to the level of messing around with your pricing plan and free tier. If we were owned by private equity though it'd be a very different story. Those guys are experts at wringing blood from a stone.