Continuations

API pricing requires striking a tricky balance between the needs of developers and the cost/profitability of the provider. I am on the boards of several companies that provide APIs as their primary business model, including Twilio, Dwolla and Sift Science and have been in long discussions about the relative merits of pure usage-based pay versus some type of bundle pricing (sometimes also referred to as t-shirt pricing). This morning Ziggeo which provides video recording, storage and playback ...

I am sympathetic to Uber’s basic argument that surge pricing is the market at work as (a) nobody is being forced to take an Uber and (b) raising prices puts more Ubers out on the street. On Saturday evening, close to the height of the storm I had to go to the Upper East Side to pick up one of our kids. I quickly decided to take the subway which was running on time and only cost $2.50 each way, even though that meant I had to walk about a dozen blocks in the storm. As an avid skier and lover o...

Last week, I participated in a panel on the implications of SaaS/Cloud for SMEs. One point that was made by several of the panelists is that a big advantage over on-premise software is that you are always on the latest version and thus get to benefit from improvements over time. Those improvements can be additional features but they can also come in the for of reduced prices. Amazon for example has cut their prices for EC2 and also made such cost savings available as reserved instances and mo...

Yesterday brought two announcements and one rumor that all relate to the pricing of digital content: the New York Times announced that it plans to add a paywall in 2011, Amazon announced that it will offer authors a 70% royalty rate, and book publishers are apparently trying to convince Apple to act as a distributor with prices set by the publishers. All three of these are interesting and important. Starting with the last. It appears from the Apple discussions (if the rumor is correct) that p...

In Monday’s post on the Economics of Abundance, I gave “name your price” as an example for how to deal with zero marginal cost. This is a case of voluntary price discrimination, i.e. folks who value something more are more likely to name a higher price. The first question of course is if such a scheme can work at all, that is will anyone pay if paying is entirely voluntary. We know the answer for this to be yes from the Radiohead experiment with about 40% of folks paying (according to Comscor...