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BONUS EPISODE - NOV 22, 2019 Basecamp Behind the Scenes

Basecamp: This Time it's Personal

with Jason Fried and David Heinemeier Hansson
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Basecamp has a long history of experimenting with “freemium” models and recently launched its most generous free plan yet: Basecamp Personal. Co-founders Jason Fried and David Heinemeier Hansson talk about the debate and data analysis that went into the launch, what makes this a little scary, and why it’s healthy for a business to experiment.

Transcript

(00:00:00) Broken By Design by Clip Art plays.

Shaun: (00:00:01) Welcome to another bonus episode of REWORK, the podcast by Basecamp about the better way to work and run your business. I’m Shaun Hildner.

Wailin: (00:00:07) And I’m Wailin Wong. Last week we announced a new product called Basecamp Personal. It’s a free product aimed at freelancers, families, people working on side projects, and very small businesses of just one or two people. I was recently at a PTO committee meeting. PTO stands for a Parent-Teacher Organization for my kid’s school and I was watching everyone scroll through their phones to look up information in old email threads like, oh so-and-so said they’d do this, right? I don’t remember what did this person tell me? Where did we leave off with this project and this event and I thought we should get on Basecamp because I was able to eat like half a dozen Dunkin Donut munchkins in the time it took the committee chair to find like one email.

Shaun: (00:00:49) Gross. You know Basecamp has offered free stuff before, including limited time trials of our paid products, but the launch of Basecamp Personal represents something new for Basecamp, something we haven’t tried before. On today’s episode, co-founders Jason Fried and David Heinemeier Hansson talk about the shift in thinking that led them to creating Basecamp Personal and how they’re approaching this experiment.

(00:01:11) Broken By Design by Clip Art plays.

Wailin: (00:01:17) I wanted you two to start with a history of free at Basecamp because I feel like we’ve been on a, not me personally, you two have been on a journey about what to give away for free, how much, whether to give things away for free. Can you start just by giving an overview of the history of your relationship with free stuff? Free software?

Jason: (00:01:40) Yeah. When we launched Basecamp on February 5th, 2004, it included a free version. From day one we had a free version of Basecamp, which was one project for free, and then we also had three paid tiers. I think it was $19, $39 and $59 per month were the different tiers, I think, at the time.

(00:02:02) So we always started there. And so freemium is actually, I mean we’re not going to take full credit for inventing that, but we were like one of the first ever to really do that in software as a service land. And then, with all subsequent versions of different products that we made, I’m pretty sure we’ve always had a free version. Of Backpack and Campfire, and Highrise.

David: (00:02:20) Everything has had a free version of some kind until, actually, I think the first time we went without anything free was about three years ago, maybe four years ago, shortly after the launch of Basecamp 3.

Jason: (00:02:32) We’ve always had a free trial. So that’s the other thing. So even when we didn’t have a flat-out free version, like free forever version of Basecamp 3, we’ve always had a free trial. Either 30 days or 60 days. I think we experimented even with longer trials in the past, but free or free trials have always been part of our history. And we’re back to that point today.

Wailin: (00:02:50) What was the rationale for not having a free version of Basecamp 3?

Jason: (00:02:55) I don’t remember.

Wailin: (00:02:56) Oh really?

Jason: (00:02:57) David, do you remember? Why we really did it?

Wailin: (00:03:01) I think one of the reasons was just thinking like, hey, software is something you should pay for if you want to use it, and we were looking at this from the perspective of business software. That most business software, it’s businesses using it, why shouldn’t they pay for a product that they use? What we hadn’t fully considered, I think, when we made that decision was there’s a lot of other kinds of software companies or companies in general that just aren’t at a place where they have any money at all to do this. And for us to cut them off entirely from the product, I think, looking back at that now, I mean that was probably not the smartest move. But I think for us at the time it made sense as like, hey, if you want to have a sustainable business, you have to have a product and you have to charge for it and that’s how you have a sustainable business.

(00:03:56) In some ways, we were looking at other kinds of companies who were giving things away for free in a way that seemed just utterly unsustainable. They were giving it away for free because, perhaps, they had raised a lot of venture capital or because they were subsidizing it with advertisement or that they had something else to kind of fall back on and we just haven’t really had that. We have a software business that sells a service and we have to bring in revenue to pay the bills. So that was sort of what the thinking went. I think we didn’t, we didn’t think through all the angles when we made the change. But also part of it was, hey, we’ve been doing the freemium thing for, at that time, I don’t know, 12 years, 13 years, let’s try something else. Maybe the business could work in different way if we tried something else.

(00:04:40) I think one of the hallmarks of running a company for as long as we have in technology is that it’s so easy to get stuck in your ways and sometimes you kind of need to just shake the cage even if the direction you’re shaking it at is, is not ultimately where you want to go. But just having that muscle of we’re not afraid to make fundamental changes. We’re not afraid to make fundamental experiments that seem a little scary at the time.

(00:05:06) In many ways, this latest edition of Basecamp Personal, it’s just that. It’s another experiment that’s a little uncomfortable because this is by far the most generous free plan we’ve ever had for any product we’ve ever put out there. So that’s a little scary. But I think ultimately it’s a good move and it’s a good experiment. And again, if this doesn’t work, in much the same way, that not having a free plan in some way turned out not to work, we can change our minds, right? Like we have enough existing customers, we have enough goodwill, we have a enough time, really, to try things. And if they don’t work, to change our minds.

Jason: (00:05:47) I would also add, I think there was probably some hubris involved here where we’re like, you know, look, Basecamp has been around for 12 years, 13 years, like who needs a free plan anymore? Like you either know it or you don’t know it. So I think there was probably some of that with Basecamp 3. We’re like, we’ve got this new thing, do we really need to get free plans away? Do people really not know what this thing is? And the truth is many people do not know what this thing is. And I think we probably thought we were the center of the universe a little bit and we’re not.

(00:06:11) I think that what we lost from not having a free plan is that Basecamp, the concept of Basecamp, wasn’t as accessible to a lot of people. Some people simply just aren’t ready to pay for something, even if they can afford it. A trial is not enough for them. It’s too short. It’s too like, well at the end of this I’m going to have to pay like I’m not even ready to pay yet. I’m just curious. So a free version just kind of takes all those pressures off. In a way we forgot how reality works. Not everybody is ready to buy or to shop or the moment they sign up for something and it just may have crossed their mind and now they want to try it, but they’re like, eh, schedules don’t work out and then they’re gone. And then they find something else that’s free and then we’re out of the picture.

Wailin: (00:06:55) How much of the impulse to test the free waters again came out of something that you’ve been discussing on the show now for a while, which is looking at slowing signups and looking at kind of decreased visibility? Whether it was SEO or whether it was being more conscious about marketing to the point where we now have a Director of Marketing for the first time ever. Did the free thing kind of come out of some of that reflection as well?

Jason: (00:07:21) What’s really interesting about this story is that what we launched, Basecamp Personal, it didn’t start out as a discussion about free. In fact, this started out as a discussion about pay. We had been running Basecamp 3 basically at 99 bucks a month, unlimited users, unlimited projects, loads of space, for a while. And we started discussing alternate pricing plans as a way to make Basecamp more accessible to more people because we knew or we’d heard and knew that 99 bucks is a high price point. Even though it’s a huge bargain, frankly. It’s a bargain because we don’t charge per user. And Basecamp replaces five or six other products. It’s like it’s a steal really, but still it’s 99 bucks a month. And it’s hard for, especially for small businesses, for freelancers, for individuals, two or three person company to pay, to just recognize the value and I can totally understand that.

(00:08:11) So we started talking about alternate ways to deal with this and one of the ideas that came up was, gosh, should we just do what everyone else does, which is charge per user? Or per seat. We’ve never done this. The whole industry does this. We don’t. We don’t charge what we call the participation tax. We started discussing that and debating it and eventually David and I both agreed that that was what we should do. And we made an announcement internally that we were going to do this. We’re going to switch to per user pricing on Basecamp, which means that if you’re a company of three or four people, it’s going to be a lot cheaper than 99 bucks a month. Right? So that was the whole, that’s where this whole thing started and we started digging into it and it was just more complicated than we were maybe comfortable with doing.

(00:08:54) Technically complicated because like we had have per user pricing system built in. So we had to think about how to do this and it was all doable, but it just gave us a moment of pause. And that was really healthy because it allowed us to reflect on what we’re actually trying to do. We’re trying to make Basecamp more accessible for really small businesses. Companies of two or three and we start to think about like, do we really want to make that much money off companies of two or three? Or freelancers? Wouldn’t it be better if they could just use the thing? What if we just made this really accessible by making it the most accessible price ever, which is zero? And so we started discussing that and there was a lot of debates internally about this. David and I went back and forth on it for a while and we finally came around to this idea that this is worth a shot.

(00:09:33) We should try this again. We’ve done this in the past. It didn’t sink the business. In fact, it may have made the business in many ways because it exposed Basecamp to a whole lot of people even though many of those people never paid. Certainly some of them did. And clearly that’s why we’re still around 20 years later.

(00:09:47) So this whole free thing came from talking about pricing it differently and then came from a pause and then came from reconsideration of what we’re actually trying to do. And then we started getting really excited about this. But what was different, and David alluded to this is that we decided internally we, the codename was Big Free. Free had always been for us one project and as David also mentioned and we looked at competitors over the years and we’re like they’re giving away too much. We decided, though, that this time around we are going to be a bit more generous than one project because one project has like a low ceiling.

(00:10:18) You kind of get in there, you do your one thing and then all of a sudden like you’re kind of stopped out already. It’s almost like a free trial. We want to give people a little bit more head room, to experiment with what it’s like to manage multiple projects with Basecamp because Basecamp begins to really excel and really help you once you can juggle multiple balls at once. We settled in around three projects, which is what the Basecamp Personal thing is. 20 users and a gig of space. And we felt like that was plenty of room for people to really use this and never feel like they’re really being limited. That’s how it all happened. It didn’t happen with the intention of going free. It happened with the intention of changing pay.

Wailin: (00:10:52) David, is that how you remember it?

David: (00:10:55) Yes. So, the structure is right. I think Jason and I, where it’s helpful that we have two sets of eyes looking at it. We look sometimes at things from a slightly different angle. Jason is generally more on the, hey, let’s just try this crazy experiment and see where it goes. And I’m oftentimes, especially when it comes to the finances, the more conservative, the more hesitant, and the more, well, we kind of have to make sure that we don’t tank the business. Because the thing about free is that free is very popular. Everyone likes free and free is great, right? But if you keep just giving the farm away, then there’s not going to be anyone left to provide free.

(00:11:36) So for us, a lot of the anxiety or a lot of the anxiety for me, at least that big leap here was the fact that we were so much more generous than we had been in the past. And how would that affect the rest of the business? Because if everyone simply arrived at Basecamp tomorrow and decided this free plan has everything I need, why would I pay? Then, I mean clearly, it’s not sustainable. We don’t have that cushion of venture capital. We won’t monetize people’s data. So it’s not like we can make money some other way.

(00:12:06) But then, for me, part of what made this whole thing work as a leap, as a leap that felt like it was inspiring, was who are we really targeting this towards? And I think that’s where we ended up focusing on Basecamp Personal. I’ve used Basecamp personally for years and years and years. Jamie, my wife, and I used Basecamp for a construction project for our dream home and it was amazing. This was one of those experiences where you just go like, wow, if we hadn’t had Basecamp to organize this, it would have been such a mess.

(00:12:38) We would have gotten things wrong. We would have not been able to look up the decisions that we had made, especially on a project that lasts a while, as our project did. And I just felt like this should be something more families have access to. Like that level of calm feels like a sort of gift. And if we’re going to give anyone a gift like that, just give something away for free. Giving it away to families or to students or other sort of people and communities would never pay $99 a month for a piece of software like Basecamp. That feels great.

(00:13:12) So it’s one of those things, just like with the approach I have to advertisement is that a lot of advertisement is wasted. You just don’t know which half. Right? That’s the joke. But if you spend your advertisement dollars in a way that feels good to you. If we advertise Basecamp on some podcasts that we feel great about, this is a great podcast and it doesn’t necessarily make the numbers in terms of some conversion rate that we’re looking at. Hey, what’s the worst that happened? The worst that happened was we helped an awesome podcast. Like how is that bad?

(00:13:42) And the same thing with the leap here for Basecamp Personal. If the worst thing that happened was we gave too much away for free to families, to individuals, to students, is that really such a bad thing? As long as we don’t tank the business and that prevents us from doing more of this? That’s the kind of generosity I think we’re all here for. The kind of generosity that I wasn’t here for was, let’s give this away to businesses who could totally afford it, but just kinda didn’t want to.

(00:14:16) And threading that needle was difficult. And I think that’s also one of the reasons why we took our time when we first introduced this new generous, Big Free plan. We didn’t blast and broadcast it to the world. We actually ran for quite a while in silent mode where it was up on the site and we were testing it and Jane, our data analyst, was running all the numbers and giving us the updates and we kept tinkering and tweaking. I think that that was why the process was longer, but why ultimately, the anxiety with making such a radical change, actually as this is, was something we became comfortable with.

Jason: (00:14:51) I’d also like to add one other thing because everything you said is right, there, and I agree with all that. I think, my feeling, too, is that really truly small companies, one or two or three people, like they fit in that bucket as well, which is they’re not going to pay 99 bucks a month. They’re hopefully going to grow and I’d much rather them grow with us. They weren’t going to pay 100 bucks, it just wasn’t gonna happen. So can they come along with us for a while and then maybe they’re going to grow their business and realize they need a little bit more? If we’re going to give something away, if we’re going to be generous, I’d love to boost people who are just getting started. That should be who we are or what we’re about. Big tech doesn’t care about the small guy. They say they do but they don’t.

(00:15:30) You know, what’s kind of interesting is when we launched this quietly, there was two plans. It was Basecamp Unlimited and then Basecamp Free and what we kind of realized about a month in is that there wasn’t enough contrast there, unlimited and free. They don’t say anything about use patterns and use cases. So we renamed the plans to Basecamp Business and Basecamp Personal. Renaming the things, I think, helped to provide some contrast and there’s always going to be a few that try to game the system and that’s fine too. But I think that naming them really helped set that apart and it also changed the mix a little bit better, which to David’s point, was a much better financial outcome for us. It just, there was less cannibalization there. And I think that really helped us get more confidence in the idea that we could hopefully support free accounts like we’re doing now.

Wailin: (00:16:16) So how long did you have it in stealth mode where you could go to the website and sign up, but we weren’t advertising it? How long did that experiment run?

Jason: (00:16:23) It was a few months. I don’t remember exactly how long, but a few months.

Wailin: (00:16:27) And what kinds of findings were you asking Jane, our data analyst, to analyze?

Jason: (00:16:33) One thing is conversion rate. The number of people who are signing up for the Unlimited plan that become paying customers, or now, the Business plan. Were we getting more people in the front door? Because if we’re getting the same number of people in the front door and a third of them, or 50% were going free, that’s not gonna work. So like, do we have a bigger pie here? Are we attracting people who wouldn’t have given us a second look?

(00:16:53) One of the things we’re hearing on Twitter right now, which is really encouraging, is people are like, you know, I haven’t used Basecamp in 10 years, but now I’m going to give it another shot because I’m going to try this Personal thing, I’ve got some stuff on the side. And I guarantee you a lot of those people are going to go, this is fantastic, like we should be doing this in our business.

(00:17:07) But we wanted to make sure, and we haven’t fully cracked this yet, either, that we don’t cannibalize the paid version too much. So we’re keeping an eye on conversions, keeping an eye on the ratio of people who go from free to pay, and also people who sign up for pay. Truthfully, we haven’t fully made it work, but there’s also the other question is what does that mean? Because you can’t ascribe a value of zero to a free customer because if you do that, then you’re not really being fair because exposure’s worth something. They’re going to invite other people to this thing and they, so one of those people might end up becoming a paying customer and we can’t necessarily always track where they came from. But added exposure right now, especially in this market seems like a really good thing.

(00:17:45) So there is a value. We haven’t figured out what that value is yet, but certainly it’s greater than zero.

David: (00:17:50) The funny thing for us, though, is just that we really do have to care about these numbers. Like compound interest works in such a way that you actually don’t have to ding your business that much before it compounds into a really material loss from where you were. This is why we have Jane on board as the data analyst to actually dig into the numbers and then at the same time, say the numbers aren’t all. Like we’re not waiting on this until the numbers give us the definitive answer. We’re going to take a leap. We just want to make sure that, like, hopefully it’s not going to crash us to the ground. We don’t need 100% confidence. If you sit around waiting for 100% confidence, you never do anything.

(00:18:33) So we needed just some confidence that this was going to pan out and a couple of months of testing and tweaking and gave us that confidence. And then we go, okay, let’s do this, let’s roll it out. Because that’s the other factor of this is, this whole gambit of giving so much of the product away for free to the people we want to give it away for free to relies on the fact that there is some interest here. Like if we’re just basically saying the number of people show up at the front door, those are the ones we have and these are the options we give them. That’s only part of the equation. The other part of the equation is hopefully more people show up to the front door when more people know that Basecamp is something that they can use either as a small freelancer starting out or as a family or a student or any of these other groups that we’re targeting.

(00:19:16) You hopefully get more people to show up. So that’s the other part. We couldn’t know that until we really pulled the trigger. I mean we just started talking about this, this week and that’s the big unknown as well. Like, us talking about it, us promoting it, does that actually, does that move the needle? And in which ways? This was part of the uncertainty.

Jason: (00:19:35) It’s hard to put a number on goodwill. It’s kind of been really satisfying on Twitter, and this is one of these little subtle things that you can’t kind of measure, but when I made the announcement, there was like a few hundred maybe replies saying thank you, thank you, thank you. And I wrote back to each person. It’s one of these things where like does that matter? I think it does. Now, is it measurable? No. But it was an opportunity to announce something that people really liked.

(00:20:01) This is the kind of stuff that, that you basically kind of put in the bank in a sense. Like right now there’s a good warm feeling around this and that’s something I think we needed. Sometimes you have to, you just have to jump out there and do something that maybe doesn’t always necessarily make sense on paper, but that there’s a bunch of intangibles around that you suspect will ultimately pay off down the road. And that doesn’t always have to be a financial payoff. There’s brand awareness here. There’s a goodwill, a good vibe, a good feel, and it’s kind of coming at a really good time. Given the fact that, you know, there’s a lot of talk about tech being very negative right now and it kind of feels like we’re kind of talking about how we’re small tech and small tech and kind of do some of this stuff in a different way.

(00:20:38) And so anyway, it feels good. It feels like the timing’s right, and it seems people really received it in a positive way. And I think that those things are, again, hard to measure, but they matter.

(00:20:47) A lot of the things that we do as a business are about does this feel right or not? Either standing up for something and speaking out about something. And David’s sort of our lead there, right? Like we want to push back on things that don’t feel right. Also we want to do things that just feel right and as long as we’re careful and thoughtful about it, we’re going to come out ahead and a lot of people are going to be exposed to Basecamp in a great way. I’m glad that we’re now in the consideration set for helping people who may not have paid for something in the first place.

Wailin: (00:21:14) How did you approach the support factor, both in terms of knowing there’s going to be a lot more incoming emails potentially from people using it, and also how you triage, let’s say, feature requests? Because someone who’s using it for personal projects might have different priorities or different things they want out of it than someone who is using it in their business. Do you have kind of like a plan for how you’re going to approach requests that come in from now these two different categories of customers?

Jason: (00:21:46) Well, one thing that sets the plans apart is that people who pay for Basecamp are first in line for support. So that that is one of the differentiators. So it’s not just projects and people and space, it’s also support priority. And I think people recognize that that’s fair. We still get back to everyone very, very quickly. So it’s not like you’re waiting days. It’s like you might wait an extra 20 minutes. That’s number one, there. We also talked to the support team about like this is probably going to increase the number of support requests because we’re simply gonna have more people signing up. And we did have more people signing up and it didn’t really push requests that much initially. After yesterday or day before we had like 10,000 new signups or whatever it’s been in the past couple of days. That might change things. So we’ll have to kind of see how that shakes out.

(00:22:27) But also that’s probably not going to continue at that level. So part of this was testing that out too, which was the soft launch. The quiet launch over the past few months was kind of feeling out what are the support requirements going to be, how are they going to change? The last time we hired for support, we ended up hiring two people. We lost one and hired two. So we’re always a little bit ahead on the support angle here. So, as far as requests go, I think we’re going to treat requests all the same. And because most of the requests are the same, it doesn’t really matter if you’re paying or you’re not paying. People still want to do the same kinds of things. So I don’t think that we’re… we’re not going to value paid requests over free requests. We’re going to look at them all objectively and go, that makes sense. And by the way, we’ve heard this before, or here’s another one for the pile. When people are asking for this feature, I think the same number of things are going to kind of come in in the same kind of categories of things are going to come in.

David: (00:23:13) I think the other thing that’s important here is if you just look again this purely by the numbers and you look at support purely as a cost center, as something you should be trying to minimize, it’s gonna look a little scary. You’re going to go, well, we spend, I don’t know, $5, $7, $10 per email in terms of this is what we spend on support and these are how many requests we can handle. But that’s a very myopic way of looking at it. Anyone who gets to interact with our amazing support team, they’re going to feel much better about Basecamp afterwards.

(00:23:48) We hear this over and over and over again that people write support. They expect to get a shitty experience because that’s what they’ve been getting most other places. They expect to wait a long time. They expect to get a non-answer. They expect that support can’t actually help them. So when they hear from our wonderful support team very quickly with a complete human answer that actually solves their problem and is actually kind and individualized and considerate, that’s some of the best marketing that we can do.

(00:24:18) So even though yes, it technically cost something and yes, we were technically giving it away for free to individuals who aren’t paying us at the moment, it leaves an impression that’s priceless.

Jason: (00:24:30) We could have made a very simple decision to say, if you’re a free customer, you don’t get support at all. And that’s how it feels to write most companies when you’re free, like they don’t care. That wasn’t the plan. The plan was for us, it was like, yeah, pay should go first, but you absolutely going to get support and you’re gonna get the same level of support. It just might take a little tiny bit longer. But again, we’re talking about minutes here, not days. We want people to always have a great experience with us as a company and a brand.

Wailin: (00:24:55) Now as far as the marketing and the launch of this, did you plan to do it during the week when David was going to be on national news complaining about Apple Card?

Jason: (00:25:05) David’s always complaining about something, so that’s always a good timing. No we did not. It just turned out that the, the latest analysis had come in and we looked at a few things a little bit differently and we go, okay now we’re comfortable to make noise about this. Tuesday is typically when we kind of announce things, because Mondays are these days where everything’s sort of piled up on the weekends for other people and people aren’t really paying attention to new stuff. So we said like let’s do it Tuesday. And just so happened that that kind of coincided a little bit with that with David’s a newfound celebrity.

Wailin: (00:25:32) But you didn’t, you weren’t like, Oh let’s hold it because like this is sucking all the oxygen out of the room this week.

Jason: (00:25:39) No, there was, there was talk like should we do it Monday or Tuesday? And then we did say like Tuesday’s a better day anyway. Also David’s attention was focused elsewhere

Wailin: (00:25:46) Oh, was it?

Jason: (00:25:46) Oh, was it. Like Monday he was just so busy with all this stuff that it just felt like let’s wait for Tuesday, anyway. But it wasn’t lined up this way. It was just like what was a convenient launch date at the point where we were both available to talk about this. But it helped. Certainly, I’m sure it helped. On some level it helped.

(00:26:05) Something someone mentioned I saw on Product Haunt, is they said like you guys offered Basecamp Personal before. And yes, we actually did. So back in Basecamp 2 era, which was like 2012 through 2015-ish or 16-ish, I think, we did offer something called Basecamp Personal, but it was different. There was one project, and it was 25 bucks one time for that project. So if you want to manage five projects, you’d pay us 25 bucks per project. But you could run that project forever. And we did ramp that down over time, but we didn’t kick anybody off of it.

(00:26:36) Someone said like, what if you decide that this doesn’t work? Well, we’re going to, just to be clear, like if we decide that we don’t want to have a free plan seven months from now, we’re not gonna make anyone who’s on the free plan pay. They’re going to be able to keep what they have. Like were we grandfather people into these things. So I just want to make sure that’s clear for anyone who’s listening, who’s wondering, well what if you, because we’re talking about how this may or may not work. You know, what’s going to happen if I sign up for this and I have stuff on it and you kill it. Well, we’re not gonna kill it, we just might not offer it any more to new people. But absolutely your stuff is safe and will always be there and will always be free for you. So I just wanna make sure that that’s really clear for people.

(00:27:07) Broken By Design by Clip Art plays.

Shaun: (00:27:13) Basecamp is produced by Wailin Wong and me, Shaun Hildner. Music for the show is by Clip Art. You can find our show at rework.fm. We are on Twitter at @reworkpodcast, and of course you can check out Basecamp Personal for yourself basecamp.com/personal. See you back here next week.

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