Mailchimp made a business decision on Wednesday. One that has already made waves throughout the community. On a personal basis, I think it’s a horrible one, and it will be creating a lot of extra work for me. Ben Chestnut, CEO of Mailchimp is a massive asshole who deserves to step barefoot on legos for the rest of his life. Putting my emotions aside, I’d like to explore why they though this was a good idea, and give a succinct explanation of why I think they’re simply wrong.
Mailchimp’s modus operandi
Buried somewhere in their corporate blog is a post by their resident data scientist, who described how they make data-based decisions in their company. The gist of it was he built decision trees based on several hundred features, and distilled it to one or two features to focus on. Great stuff, but he came to the conclusion that the best predictor if a customer will pay more money is if they’ve already paid money. Otherwise known as selection bias.
This didn’t sit well with me, because I recognized it as selection bias. Worse, it means that internally, they’ve decided that their churn rates are extremely low, and that it won’t affect future growth. If they’re really intelligent, that may be the case. But the fact is they took one of the cheapest options on the market with a free tier, and turned it into the highest priced option. They won’t get new customers because they raised prices, but they will drive away a ton of existing ones. Churn is never zero and they just increased it; at the same time decreasing their ability to bring in new customers.
Consolidating your revenues in a small cadre of customers means your fortunes rise and fall with them. It’s generally well accepted that this is a bad thing, to the point of having its own proverb “Don’t put your eggs all in one basket”. Worse, when you alienate your smaller clients, you basically kill off any chance of future customer base growth. That’s a Bad Thing (TM) for future growth.
Never assume malice when stupidity will suffice.
– Hanlon’s Razor
Perhaps related, but it would appear they’ve replaced almost all of their upper management in the last year, so this may be a result of new hands needing to make changes to prove they’re doing “something”.
Simply put, this is a great move to increase short term profits, but will ultimately kill future revenue. Expect belt-tightening and backdoor layoffs in a year or two, followed by them shopping for a bailout acquisition (IBM seems a likely candidate).
A legal aside
Fuck you, Mailchimp. Fuck you Ben Chestnut.