Yahoo Ditches Premium Service Package; Did Anyone Notice?
from the hello?--anyone-in-here? dept
A few years ago, when Yahoo was still struggling a bit to figure out what its business model was, it decided to try to be a bit more like AOL, by offering a "premium package" of services that people could layer on top of whatever broadband package they already offered. It was like AOL's "bring your own" program -- except that Yahoo never really did much to explain what the actual benefits were to paying. Instead of just recognizing that they could attract more users (and more ad revenue) by making better services available to users, they hoped that some higher tier would attract some paying users. It would appear they were wrong. The company has now ditched the service, noting that it "was not an essential service for Yahoo users." In other words, there were very few people using it. Of course, if Yahoo had simply offered these higher level of services for free, and continued to sell ads, they might have been able to keep more users away from the competition. When you set up a tiered service like this, the incentives are rarely good. You want to keep the "really good" stuff in the premium package. That's great... except if you have competitors who are focusing only on offering free versions. Then, hiding your best features behind a pay package means that your users simply go to the free competition, which is likely to be better than your free-but-not-too-good version. There are cases where a tiered version makes sense -- but only when it's obvious why the tiers cost more money (i.e., the customers can see the additional cost associated with the tiers). Simply charging more for extra "features" will almost always backfire -- often driving the customers you want to your competition.