Online invoicing and time tracking service FreshBooks has a revolutionary new feature for developers using its FreshBooks API: an opportunity to make money through the company’s current customer base. Through the program, developers can charge users a monthly fee, which is tacked on to what subscribers are already paying FreshBooks. The solution, another revenue stream for FreshBooks and a rare one for developers, marks a potential new approach for software-as-a-service (SaaS) companies and one FreshBooks thinks has a bright future.
The FreshBooks Add-on Store has an app store model. While recently common for hardware, it is something that hadn’t been widely applied to hosted web software, despite the popularity of developer programs. Like Apple’s store, FreshBooks keeps 30% (minimum $1) of the monthly revenue, passing the bulk of the subscriber’s add-on fee to the developer.
“Hair salons are the future of SaaS,” FreshBooks’ Sunir Shah said, a comparison that may at first be confusing. Shah’s point is that stylists tend to rent their chairs at salons. Each has their own customers and pays a percentage of their sales to the salon. “They cross-sell these customers to each other, which is both lucrative and a better experience for a customer looking for one stop spa treatment,” Shah said. The analogy translates well to SaaS and FreshBooks’ new store. It’s also similar to the ethos of the small business web directory, a group co-founded by FreshBooks.
There are already a number of add-ons available in the store, including mobile applications and web services including project management, accounting, CRM and more. Among them is ReportAway, a BlackBerry application that normally sells for $19.99. In the add-on store, the program is instead $2 per month, which is helpful to Acire Systems, the company behind the software, according to its owner Randy Jones. “Unlike the one-time balloon payment model of most online stores, this helps me plan to support customers for a long time,” Jones said.
The store also makes sense for FreshBooks customers, who’ve posted over 2,000 topics on the company’s Fresh Ideas forum. “It is our belief that the Add-on Store gives us an opportunity to finally service customers who have requests on the edges,” FreshBooks’ Shah said. The store allows the company to do this without alienating its core customers with features they won’t use.
There is a curation process to the FreshBooks Add-on Store, as the company explains:
To be clear, FreshBooks reserves the right to decide what we do and do not promote to our customers without restriction. Our reputation is everything; our customers really do trust our recommendations. If we aren’t comfortable promoting you, we won’t. However, in practice, we are mostly looking to see if your Add-on in fact works as advertised, does something useful, and does not abuse our customers.
The technical details of listing an add-on in the store are surprisingly simple. Each application has a monthly price associated. When FreshBooks users choose an application, they accept an OAuth authorization, much like using a Twitter application. At the same time, FreshBooks presumably requests the user’s permission to accept the new monthly fee. As long as the subscription is paid, the OAuth token remains valid.
FreshBooks is discovering territory that could become a very viable option for not only SaaS providers, but developers. Certainly it has been a powerful vehicle for Salesforce.com, with its App Exchange. Now FreshBooks is bringing it to small business.