Last week I was a judge in the Location category at Under the Radar. I was really impressed with the event as a whole, the quality of participating companies, and specifically all four of the companies in the Location category. I was most encouraged by a company called SimpleGeo. They’ve developed a cloud-based service providing location infrastructure for mobile apps. What I like about this is that it accelerates innovation, which accelerates the mobility revolution, which is great for all of us in the mobile ecosystem (except maybe those that have fixed assets at the heart of their economic engine, or those lacking a clear path to support the kinds of bandwidth the mobility revolution will drive…).
But, as much as I liked the company and the service, their pricing model really raised some issues for me. They have three tiers of service. They have a free service, a $399/month service, and a $2,499/month service. The breakpoints are driven by the volume of queries, and Matt explained that the free service could support an application with up to 5,000 or maybe even 10,000 users. I asked if that pricing would support someone with a 99 cent app, and Matt explained that the pricing was based on a tremendous cost savings compared to a company operating their own location infrastructure rather than using SimpleGeo’s cloud-based services.
So, let’s do some math. Taking the middle of the range number, let’s say that when we get to having 7500 users, we’ll need to step up to the $399/month SimpleGeo service. That works out to $4,788 per year in SimpleGeo services. If I charged 99 cents for the app (and I got to keep 70% of that price), then my total revenue from app sales is $5,197.50, leaving $409.50 to cover all of my other costs (assuming that my users stick with the app for no longer than a year).
Bottom line, I’m not sure that sophisticated location-based apps work at 99 cents, and I don’t think the problem is SimpleGeo’s pricing model – the alternatives are likely more expensive.
What do you think?