Back in early 2023, I initially had the idea for Magic Pages, the Ghost CMS hosting service I am running. Now, the idea was to offer an initial lifetime plan for $249 – but only for the first 15 people who signed up.
Today, I am hosting a good medium double-digit number of Ghost websites on Magic Pages – and still, all of them are lifetime plans.
I want to explore with you why I kept the lifetime business model going, what makes it sustainable, and why it turned out to be the biggest barrier for growth for Magic Pages.
The Economics Behind A Lifetime Offer
In business, there is one term I have quite a love-hate relationship with: Customer Lifetime Value – or CLV. I have worked in different startups for 7 years, and the Customer Lifetime Value was always seen as the Holy Grail.
The name already gives it away. How much (monetary) value does a customer create for your business? Or to put it in the startup language I hate: "How much is a customer worth?". If you know that metric, you have more or less cracked the code on how to do business. Because all of a sudden, you know how much money you can spend on marketing, operations, etc. to still make a profit.
The simplest representation for me has always been Netflix. Take the average amount per transaction and multiply it by the average number of transactions a customer makes in their lifetime. Tada – that is Netflix's customer lifetime value. Now, this CLV will influence how much they can spend on marketing – and how much on new content production (though in reality, it is a bit more complex, given that there are also external funding sources).
Now, the same applies to everyone who sells something online. For subscription-based SaaS businesses, the formula is the same as for Netflix. For web designers selling their services, it's a combination of the one-time fee and a potential retainer. And for lifetime offers it is, well…the amount of that one transaction.
With all of this rambling I want to show you one thing: The $249 I initially set as a price point for Magic Pages' pre-sale wasn't really random. While I didn't have real data on my customers yet, I could make some assumptions.
Calculating the Magic Pages Lifetime Deal
Surprise: the $249 lifetime deal was a simple Customer Lifetime Value calculation. Well, a simple assumption of what an equivalent subscription could look like.
My first assumption was that $9/month would be a price my customers would happily pay. The second assumption took some research. What is the average customer lifetime in this niche? How long does a customer actually stay at a hosting provider.
Now, that was a bit trickier. See, Ghost CMS hosting is an extreme niche. There are just a handful of players on the market and one – Ghost(Pro), the SaaS product of the Ghost Foundation – is by far the biggest. So, there was no point in researching within this niche.
But Ghost is often compared to WordPress. And with WordPress, there is tons of data out there. So, this is where I did my research.
It was still not easy to get any concrete data, since nobody wanted to say anything publicly. However, through some digging I found some old Reddit posts and forums where hosting providers reported an average customer lifetime between 2–4 years.
So, let's take the average of that – 3 years, or 36 months. And multiply it by $9. The result? $324.
Boring. I know.
But that is the entire magic between the initial Magic Pages lifetime deal for $249. I wanted to make sure that this is a proper deal for early birds, so I went from $324 to $249. Later on, when the early bird phase was over, I increased the price to $349 – which is still going strong today.
How Is That Lifetime Deal Sustainable?
…that is probably the question I get asked most often.
A web hosting service? Offering a lifetime deal? That must be a scam (Spoiler: This is why it was ultimately the biggest showstopper for growth. But more on that later).
Well, it's not. And I always tried to be as transparent as possible about that. The Magic Pages lifetime deal has always been 100% sustainable.
When I made the decision to keep the lifetime business model, I didn't do that on a whim. I made sure the economics worked in my favour. After all, I am running a business.
This was entirely possible, by a hosting provider in Germany that offers lifetime deals on dedicated servers. A dedicated server is basically a full-blown computer. The bare metal that the internet works on. Not a shared webspace or a virtualised cloud server. An actual machine with a power cord, an "on"-switch, and a fan that blows out hot air.
This hosting provider is using second-hand servers that they can't rent out any more (because they aren't state of the art – which, nowadays, changes every 6 months or so).
And so, I got one of these.
The initial pre-sale for Magic Pages brought in 15 sales à $249. So, after payment fees, that was about $3500. And about half of that amount went into a crazy fast server that is now serving this very Ghost blog.
Another $1,500 went to a software development agency in Ukraine, that helped me build out a customised email newsletter functionality in Ghost. And I still had $200 left.
Since then, the actual running costs of Magic Pages have been minimal. Backup space for all Magic Pages customer websites added up to a whopping €0.40 since April.
Other running costs I have every month:
- $1.50 / month for a content delivery network
- $8 / month for a smaller virtual server for backend services
- $15 / year for the magicpages.co domain
- $10 / year for the .mymagic.page subdomain
So, per year, that's about $140 in fixed cost. If we're super critical, then yes. Technically the business will, at some point, become unsustainable. That is, if nobody buys any lifetime deals, and the revenue from all previous lifetime deals runs out. Currently, there is a runway of over 25 years though (deducting profits I already took out of the business) 😬
Why The Lifetime Deal Was Still The Biggest Show-Stopper For Growth
And yet, while the business model of Magic Pages is pretty sustainable for the foreseeable future, offering lifetime plans has been the biggest show-stopper for growth.
It dawned on me about a month ago. When lots of people signed up for Magic Pages trials, but out of 30 trials, only one person converted to a paid customer. It felt odd.
So, after some investigating (aka. me asking people for feedback), I identified two reasons for that phenomenon. And both are related to the lifetime deal:
"How can this be sustainable?" / "This has got to be a scam?" / "This must be a really crappy service."
We already tackled that one. So, I have not much more to add to that, other than that I can see where this thinking comes from. Do I have solution to tackle it? Not really.
As I have mentioned, I have always been super transparent about how Magic Pages is run. So, I do believe the fact that the one-time pricing model is also used by scammier products contributes to this notion.
The second phenomenon I identified is a lot more interesting in my eyes, though:
"I don't want to spend so much money in one go"
And honestly, I can't blame them. $349 (the current price of the lifetime plan) is a lot of money. Even though, the investment should pay for itself after 2–3 years, when you compare it to Magic Pages' competitors.
I asked one of the people who told me that how they would feel about a subscription. They said a monthly subscription would be perfect. They loved their trial on Magic Pages and the customer service I offered.
So, guess what. Magic Pages will soon have subscriptions. Not to replace the lifetime deal, but in addition.
Looking back at the last year, I still believe that the initial $249 lifetime deal was the right decision. It got Magic Pages rolling.
Changing the price to $349 was also the correct decision. It represents the real value more, and I actually sold more plans on $349 than for $249.
And now I am in the next phase for Magic Pages: transforming it into a fully-fledge subscription SaaS business.
This will ultimately create more opportunities, both for the business itself, and for my customers. Recurring revenue is technically not necessary to keep Magic Pages running. But it will enable me to scale activities in a more plan-able way.
And that is the goal for 2024.
PS: Yes, that will make the current value-proposition ("no-subscription Ghost hosting") irrelevant. But I do believe that Magic Pages has established itself on the market well enough to show more competitive advantages than that. More on that in the future.