Privacy Stories: Fastmail
Fastmail has proven (over the long term), that charging a fair price for software can keep your business running and growing indefinitely.
December 8, 2020
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Fastmail started way back in 1999, when the internet was still an infant. They were acquired by Opera in 2010, but then sold back to employees in 2013, and they remain a privately-held, independent business based in Melbourne, Australia. Although their software competes with one of the biggest tech companies in the world, Google (which offers “free” email), they’ve done well balancing a focus on digital privacy with real-world usability. Here’s how.
Fastmail’s problem with free software
Fastmail’s focus has always been on providing an email service, but how they’ve done this has changed over the years. They started out similar to many big email providers: they offered free accounts and put a link to their service in the footer of all emails sent. This was the industry norm for a long time.
With their free email accounts, they began to notice several problems arise (especially relevant to a company that didn’t have huge amounts of external investment):
- Since anyone could sign up for a free Fastmail email address, a lot of spammers took advantage of this and began sending out spam from their Fastmail email accounts. This drove down the “sender reputation” of Fastmail’s mail servers (and thus hurt the sender reputation of legitimate users).
- People who were using their service for free (or any service for that matter), didn’t value the service as much because they weren’t paying for it. So they required a lot of support, and a whole lot of feature requests.
- The free accounts Fastmail offered weren’t converting to paid accounts at a high enough rate. So for a time, Fastmail used advertising within their software to generate revenue. It’s difficult to run a self-funded business when you offer free-forever plans, and it also took their eyes off the ball in terms of creating value for their paying customers.
So, in 2012, they stopped offering free-forever plans to new customers. They did this to focus on a business model of selling software as a service for revenue, instead of selling advertising to generate revenue.
Charging money for Fastmail super-charged their revenue growth
Revenue growth immediately improved when they stopped offering free-forever plans, and focused on premium (paid plans) for paying customers instead. By generating more revenue, they were able to update their branding and interface, focus on features specifically geared to paying customers and business accounts, and have quicker support (since it was now just for people who paid them to use their software).
By selling software instead of generating revenue via advertising, Fastmail could focus on creating the best possible email service. Which is what they’ve done. They are now able to differentiate themselves from free email service providers by:
- Being able to focus on digital privacy in a way a product like Gmail cannot—Google doesn’t give away free email accounts because they’re nice, it’s because they monetize them in other ways, and users pay for Gmail with their digital privacy instead of their money.
- Offering great technical support 24/7 with a globally distributed customer service team. Because Fastmail generates healthy revenue, they can afford to hire a decent-sized support team (one third of their company currently).
- Because they don’t need or want to sell personal information about their customers, they can offer features like proxying all images through their own servers instead of loading those images on the end users machine. This is huge, because spy pixels/trackers can collect far too much data about us when we open emails. Things like IP address, location, etc, can all be collected when we open emails, which is why Fastmail was probably the first company to load these images through a proxy, making the tracking information useless to email spy tracking.
- Fastmail focuses on each customer owning their data and doesn’t charge extra for customers using their own domains. That way, even if someone leaves, they can just set up the same email address (at their domain) elsewhere. Luckily, not many folks leave Fastmail once they start using their service.
Another important aspect to note about Fastmail’s business model is that they intentionally created a revenue stream that was built around many, many customers paying approximately the same amount. This means no single customer is paying them the bulk of their revenue, so no single customer can suggest or affect their roadmap, revenue, features or support. This way, Fastmail’s focus can be on “what benefits every customer” vs “what benefits just one customer”.
Being clear about who their software is for and who it’s not for is powerful. Losing a single, high paying customer could really hurt a company, whereas losing a single customer, out of thousands, because there's not a good fit, is far less painful.’
Fastmail’s balance between digital privacy and real-world usability
Oddly enough, the growing tide of awareness around digital privacy and privacy laws hasn’t changed or affected Fastmail’s growth. Their growth has been steady for a decade now, and the news cycle which has lately been quite critical of Google hasn’t changed their growth, for good or bad.
They’ve always tried to offer a rational middle ground between hardcore digital privacy and how most normal people use email. The lens they use to consider privacy implications is from a standpoint of needing to use and find emails, forever. This can be complicated when you bring in end-to-end encryption for emails (which some of their competitors do), and can very quickly make it hard to access an email account or even find emails/attachments.
Instead, as mentioned above, they consider real-world implications of privacy and offer image proxying. They also focus on the best security around (one of the first companies to offer 2FA and 2FA via devices like Yubikeys), and my personal favourite feature: letting your username be different from your mail email address (making it far harder to hack).
Competing with big tech, and winning
When Gmail came out (offering free email to everyone), Fastmail’s growth for paid accounts didn’t decrease or change in any way.
They’re clear where they compete and where they don’t: if someone only cares about free, then that person isn’t a great fit for Fastmail’s premium/paid services. Fastmail doesn’t waste time or energy on trying to attract the wrong sort of customers, and if someone is willing to trade everything (privacy, attention and more) for free software, well then, that isn’t their ideal customer.
Even with G Suite (Google’s paid offering in email), Fastmail easily differentiates itself with a focus on privacy and security. Because email is the linchpin in everyone’s identity, they’ve made those two areas of their business amazing. Think about it: email is where your password resets go, your most important banking notifications go, and even things like your trip itineraries go. If you ever lost access or had a breach to your email, you’d lose access to basically everything in your life that has value.
They are always innovating around privacy and security too: with world-class data centres (on hardware they build themselves), full data backups, and listing login attempts made on your accounts. They even offer free email aliases, so you can use different email addresses for each different service you log into. And, if customers ever have issues, Fastmail offers quick and speedy human support.
Exceeding the amazing expectations people have for their email account
People want fast email. Delivery has to be speedy, searches (even spanning thousands or more emails and attachments) need to be nearly-instant and support has to be there when it’s needed. All of these things aren’t easily doable if your user-base isn’t paying for your product. Luckily, Fastmail has proven (over the long term), that charging a fair price for software can keep your business running and growing indefinitely.