Earlier this week there was a huge announcement made by the company MoviePass. For those unfamiliar with the service, MoviePass offers all-you-can watch movie tickets (with a few stipulations) for one monthly price. It sounds mighty familiar to the MSP’s mantra of “All-you-can-eat” service contracts.
However, at the beginning of the week, MoviePass did something unprecedented and it has been making waves across the nation. They lowered their monthly price from a respectable $35 / month to just $9.95 / month. This means that it is cheaper to see one movie per month through MoviePass than it is to just straight up buy the ticket from the theater. But if you go watch more than one movie in a month then the savings on movie tickets just get silly.
So what does this have to do with Managed Services? Well, it got me thinking. Often markets are redefined by the rebirth of pricing structures. Just like “all-you-can-eat” pricing has up-ended the market for MSPs, so could a reversal of that pricing structure.
All-you-can-eat has become the profit center for MSPs, removing the reliance on hourly work. This transformed IT companies into (essentially) insurance agencies. We insure our customers against IT failure for one flat monthly price. Historically, that insurance costs about $80-$300 / user depending on the IT company and the business location.
But let’s spitball for a second. What if that service cost a mere $10 / user. What if we went the MoviePass route and slashed our prices to operate our primary business at a loss. Where does the profit come back in?
For MoviePass the answer is “user information”. Better known as “The Facebook Profit Strategy.” Offer the core service for free and sell out your users usage habits and information and/or display ads to your users.
Since this all went down at MoviePass, I have been thinking about how an MSP could take advantage of the same thing. We literally infiltrate clients on the deepest level and probably have the best visibility in the world as far as user information goes. That information is highly valuable – though in exchange for this level of access most of us vow to defend user privacy to the bitter end.
But what if that trend were reversed? Again, just theorizing here. What if an MSP were to say “screw it” and offer a very inexpensive service plan to clients with the goal of making money on the sale of end-user information? Obviously, passwords and other sensitive information is out. But software installation information could be worth millions of dollars in the right hands. Website viewing habits of business users? This is a profit center that MSPs have yet to tap into, but one which I expect we’ll see in the next five years.
It is also possible to build an ad network where users are presented with targeted advertising in exchange for IT Service. For example, you could send an ad to all end-users who are using Quickbooks advertising an alternative Employee Payment method. CPM or CPA ads could be worth a lot of money if they are targeted at the right people.
Obviously, the tightrope of user privacy is a difficult one to walk in this type of business, but if a company like MoviePass, or Facebook, or Netflix can do it, I imagine that an MSP could potentially pull this strategy off as well.
Am I recommending going down this road? Not necessarily. This is a complete reversal of company pricing and policy for 99% of the MSPs on the market. But the new currency of this generation is information for targeted marketing. Companies aren’t always able or willing to pay in dollars for service like they used to. But their usage habits and interests are often something they’re willing to offer in exchange for cheap or free service.
After the obvious privacy concerns, I only have one warning for you. Don’t plan to make money the first year or two, you won’t be able to really profit until you have a large enough user-base. This means lots of capital. For an MSP like this to work, you’ll need money in the bank to get started, and lots of it.