Shopping recommendation service Decide is pulling the trigger on a very big change today, one that says a lot about the perils online startups can face when it’s time to turn their product into actual businesses.
Decide, stocked with veterans of price-tracking service Farecast, offers a shopping recommendation service for consumers through its website and mobile apps. There are plenty of competitors that offer advanced search and historical price tracking for expensive purchases, but Decide takes things a big step further by crunching tons of data to actually predict price adjustments and new product models before those changes hit the market.
Up until now, those services were totally free—and, in fact, could earn you a little money, by way of a money-back guarantee to back up its price predictions on all kinds of consumer products.
But as of today, Decide is making its most valuable features available only to users who pay a $30 annual membership. (You can take advantage of a free one-month trial by using the code DecideFriends). Decide’s tracking of past prices and its aggregation of consumer and reviewer ratings will remain free for everybody.
Decide had actually telegraphed this move a little while back, when it announced its price guarantee program. In a note to users, CEO Mike Fridgen said the choice to start charging for the best parts of its service was made to keep advertising from sullying Decide’s position as an honest broker of product information.
“We are not influenced by advertisers and retailers and do not accept payment for highlighting their products. As we decided to take the next step as a business, we had a tough decision to make — either allow advertisers on our site (which would make them our customers and we lose our objectivity) or roll out a Decide membership and charge for valuable features,” Fridgen wrote.
That part about making the advertisers customers, rather than users, is particularly resonant with anyone who uses other online recommendation services. One of the biggest is Yelp, which is routinely criticized by business owners who believe the site devolves into a “pay to play” operation that extracts advertising dollars. Yelp has long denied this, but as Fridgen’s note implies, the mere presence of advertising—and the need to sell those ads—can muddy the waters for businesses and consumers.
Anybody who’s in a traditional content business, like the news media, can also tell you about this problem. Even the most exhaustively detailed description of the church-state divide at a big-city newspaper won’t dissuade all of the skeptics from their conviction that advertisers influence coverage. And advertisers have been known to throw their weight around over unfavorable coverage.
“Who can you trust in making a purchase decision?” Fridgen said in an interview today. “We can’t have mixed incentives with how we’re compensated. That’s why we’re focusing on the user as our customer—having all the features and all the focus being about helping them level the playing field.”
There’s another set of considerations at play here, of course. Making a lot of money with online advertising depends on a huge and consistent audience—Fridgen says Decide’s Web traffic fluctuates, but he says the site is seeing “hundreds of thousands of users a month, and over a million pageviews a month.”
But there’s also the question of making money through the mobile version of your connected service, an increasingly important sector that even enormous services like Facebook have found difficult to turn into significant sources of revenue.
Subscriptions are another story altogether. Regular payments from users are one of the most coveted forms of income for any business, and a “freemium” service like the one Decide is now offering is particularly well suited for mobile applications. Gaming companies and many others on the front end of the app economy have shown that offering a basic service for free and charging heavy users or big fans for richer features can attract a big enough user base to make the paid side quite lucrative.
And when you’re talking about comparing prices on consumer products, mobile devices have to be an enormous part of the equation—there isn’t a much better example of why someone would want something like Decide than your average harried shopper trying to see if that snowboard, chainsaw, dishwasher, or camera is a good deal. And Decide actually has bigger ambitions—Fridgen has said several times that the startup wants to get into the car market someday.
Fridgen tells me that Decide looked at companies like Consumer Reports, Angie’s List, and Motley Fool as examples of leaders in making a membership service work. Consumer Reports is particularly interesting, since Decide pitches itself as a kind of smarter, 21st century version of the shopping recommendations publication. The magazine is published by a nonprofit organization, Fridgen notes, but counts some 8 million subscribers.
“They make hundreds of millions in revenue a year,” Fridgen says. “If you could strip away the cost structure a bit, it could be a very profitable company.”
Decide employs about 30 people at its Seattle headquarters, and has raised about $8.5 million to date from investors including Madrona Venture Group and Maveron. Decide will probably be back in the fundraising market in the first half of next year, Fridgen says.
