Why Xmarks should not shut down

Xmarks has 2 million users and signs up 3000 a day. After four years of operation they want to pull the plug.

Why?
Because they have not found a business model.

What business model where they looking for?
One which would sell the activity of their users.

What were the users looking for?
They wanted the service provided.

And users were never given the choice to buy the service they were using. And this now puts them in jeopardy of loosing a feature they need and have come to rely on.
The business model concentrated a lot of efforts on doing the things users did not want so that someone else would pay for the service provided.
The business added expenses at the expense of what the users wanted.

What is Xmarks underlying assumption?

1. A consistent service costs money to produce.
2. Internet must stay free as it is impossible to get any significant number of people to pay for what they use. Their model is Google: a company can make a lot of money by NOT selling the service it provides to it’s users.

On the big Web there are today two models: free as in the case of Facebook, or pay per year or month as in the case of LinkedIn. The third model of the AppStore is missing.

Since Xmarks started it’s business the new “AppStore” paradigm has emerged. It shows that people are actually willing to pay a small fee for an added service. Buying a convenience is acceptable.

Today Xmarks, after having sent this week an email to all it’s users informing them that they are pulling the plug, has sent an extra message. It has proposed to it’s users to pledge to pay for the service to keep it running.

It is an interesting move. It means that they are moving out of their underlying assumption that it should be free. It could work. But they are asking for a yearly $10 fee.
This has a problem. It seems expensive compared to the convenience proposed. Services with a similar scope on the AppStore cost 89 cents.

So what should they do?

1. Sell the service they provide for a 89 cents fee renewable.
2. Put their efforts to develop features around the service their users are actually using.

To keep the business going they are asking 100000 users to pledge $10 each. But do they really need a million dollars a year for operating costs? I don’t think so for they will spend less than they do now. A lot of effort has been put into trying to find a business model. These expenses can lessen. Of course they may not make big bucks, and their investors will not get back their initial investment, but they will make a decent and regular income. It is not a Google model but rather a ReadItLater or a Feedler model. A feature you need and you are willing to pay for. Competition exists but it is nice to find a service which does it well.

By making it cheaper maybe many more users will happily pay for the service they are now relying on.
A proper AppStore for Internet addons would make things easier for Xmarks and for the likes. Maybe it will emerge soon.

PS. Xmarks has said that it’s service is equivalent to existing syncing which exists in browsers. It is not true for what they do is consistent over many browsers and they keep the syncing upto date even with browser upgrades. This is one of their Unique Selling Points. They seem to be overlooking it in their quest of building a business model dissociated from the service they provide.