I have identified a niche community, for which I want to build a social network. From compete.com, I see that the TAM is at least 10K unique active users. Their web activites revolve around an archaic static site.
I believe this niche wants a social network, and will pay for it. (They spend a lot of money on this niche.) I believe I can attract 1000 paying users, say $10/mo.
However, I do not want to invest money in software development yet before I test the market. I have found some open source social network software, which has basic functionality. It does not support different account levels, or payment, or more advanced features. But I think it is enough to attract the customers.
Here is my current strategy:
- Launch the social network, and make it free.
- Draw 1000 users, at least 100 of whom are very active.
- Email a fraction of the users, saying that we are going to switch to a paying model with more features, and they should sign up with the special offer. Give a variety of price points to different users, to see what has highest conversion*rate.
- Tell all users that we are going to switch to a paying model with more features, and offer the best pricepoint.
- Hire a web developer to implement the extra features and the different account levels.
- Downgrade unpaid users to read-only access.
What are people's thoughts on this strategy?
I know that it is preferable to get people to pay from day one, and that downgrading someone's privileges is not as good as making them pay but giving them a one-month back guarantee. However, I don't want to invest much money upfront until I have proven that I can draw the market. I also believe that once the users try the site, they will eagerly spend money because they appreciate the social aspect so much more than the archaic static site.