Auctiva

[mario]

For those unaware of this, Auctiva is on of the largest solution providers for eBay sellers. Most of their tools have been free for a long time, relying on eBay affiliate program for income. This has recently changed, as eBay (rightfully so), enforced the rules for eBay affiliates - the main one been that the whole program is to reward for sales that would not have happened without being referred by an affiliate - the requirement Auctiva certainly does not meet - as whoever is on Auctiva web site is already very much aware of eBay.

So what happened after eBay cut them off? Desperate for another source of income, Auctiva decided to introduce fees to the sellers, a move that was not welcome, and, it seems, disastrous. Competition jumped into the open space, and started offering good deals to sellers if they switch, which they did.

Finally, Auctiva CEO had to apologize (see http://www.auctionbytes.com/cab/abn/y09/m06/i10/s01), and introduce less expensive payment options.

Why I find this story so interesting? Because I understand the temptation to start charging for a service, and resisted it myself couple of times in the past. The worst thing one can do is to make its customers angry. Because after that it's no longer about money - users will switch to even a more expensive service, and they will never come back.

Couple of things to consider if running an online service, free or paid:

1) Free / Paid / Hybrid. In my view, completely free services (which depend on advertisements for income) will rarely make enough money to become sustainable. It has to be something very, very big, in order for this to happen - e.g. Google, Wikipedia, Facebook or similar.

2) Paid services are also having a hard time: income per customer is there, however user base is usually not.

3) And here we come to the hybrid model - something is free, and something is not... Supposed to be the best solution, but with many challenges. To name just a few: What is free and what is not? For the functionality that is not free, how much should be charged? Make it too low and you will not generate enough income. Make it too high, and no one will subscribe. Quite an optimization problem. And finally - what is your competition doing?

I wish I could say that I posses these skills, however I am not a business person at all. Everything about Gixen, including pricing of the mirror service was not a result of a serious business analysis, just my desire to see it grow and become more popular (and thus sustainable). In that I feel I succeeded, probably more due to my good luck than skill. In a couple of months, I expect to see a 100,000th unique ebay user using Gixen. What I learned in the process is my biggest compensation.