From Free To Premium With Ease: YouSendIt Cofounder Ranjith Kumaran (Part 7)

SM: I like that your business is simple and elegant.

RK: The roots of the business were very simple. The focus was on the end user experience. It was an easy service to use and the product was not cluttered. If you look at other collaboration services there are 80 services there, most of which are not used.

When I talk to folks on Sand Hill Road, it seems they all want you to be the ‘x’ of ‘y.’ Most people are the Google of real estate, or the Google of something else. In that context I described us at the FedEx of digital. It is a real business. For FedEx it is a $30 billion business, and that is what we are starting to eat into. Deadlines are not going away, and the amount enterprises spend on this is definitely not overstated. Perhaps we are taking budget away from FedEx, who knows?

The key is that people who use the service are busy professionals. We could not have a steep learning curve. The purchase model had to be simple and easy. When it came to making a purchasing decision it had to be easy to compare and make a recommendation. Now we are extending that philosophy to the IT organization. We want to make it easy to deploy and train.

We are starting to see networking effects. Our paid users are bringing in more and more paid users. These are users who value the premium services. We are smarter as a company. We learned the hard way on how to handle churn. We saw strange churn patterns among some users who would sign up for three months and then churn away. They would come back and then churn away again. When we asked them what they were doing, we found they were using our service on a project basis.

We have now come up with pay-per-use where you can purchase some credits and use them as you need them. A base subscription costs $9.99 a month whereas a pay-per-use cost, until recently, was $8.99. We had users who would do eight to ten individual pay-per-use transactions a month. For just a dollar more they would be able to get a subscription. They did not do that because they were just marking it down as a business cost and sending it on to their clients. I found that to be an incredibly fascinating use case.

I used FedEx twice a year, and I am happy to pay $20 to send my passport renewal to the Canadian government. If we can capture that behavior of 12 million–13 million registered users, then we could have an unlimited business.

SM: If you have 13 million registered users and 180,000 subscribers, what is it going to take to make the rest of them pay?

RK: Some of the economics are subsidized by marketing.

SM: I understand that, but if you could up the conversion rate by a little bit it would have a huge impact.

RK: That is really where I think pay-per-use comes in. Most of those users do not have a need for recurring membership. However, when I show them pay-per-use, we see 10,000 new pay-per-use customers a month. We never had that and that has been one of the fastest growing segments of our business.

SM: Have you done a good segmentation analysis on who these 13 million users are?

RK: Yes, but the results are cloudy. It is largely professionals. Our free service is so useful that we get a lot of photographers and others who are able to send unlimited 100MB files. We are happy because they tell five of their friends, and one of them will lead to a corporate account. We estimate that 90% of our paid business comes from word-of-mouth referral. We have barely scratched the surface on price sensitivity. There is a lot of psychology on pricing. We are excited about the other workflow areas as well.

SM: This is a really cool company. Thanks for taking the time to talk with me.

This segment is part 7 in the series : From Free To Premium With Ease: YouSendIt Cofounder Ranjith Kumaran
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