04 August 2020

How Vercel Changed Its Positioning And Raised $21M

Learn the strategies Vercel used to rapidly grew to 300k users and raised $21M despite narrowing down its market.

I’ve been using Vercel to host my websites for the last couple of years. It was known as Zeit until recently.

While I am overall satisfied, a string of changes got a little bit frustrating. It prompted me to analyze their new strategy and share this case study.

Zeit or Now?

The company was founded 4 years ago and quickly got traction through its main growth lever: open-source products such as Next.js, a framework to make web frontends (sites and apps).

While the company was named Zeit, they had a different name for their platform: Now. In addition to the confusing branding, they were very common names. It made it very hard to look for something on search engines.

Their initial tagline: the global serverless platform

When it started, software engineers were able to use it to host almost anything. They could easily deploy backends and frontends.

Their unique differentiator was the serverless part. It is supposed to make deployment easier and pricing is based on the actual amount of resources consumed by an application as opposed to being billed even when there’s no activity on the server.

The slogan was the following:

Now makes serverless application deployment easy. Don’t spend time configuring the cloud.

There were already many platforms with a very similar premise, such as Heroku. It felt like a really weak value.

New platform with fewer capabilities

They released a new version of their platform after two years and removed support for many technologies.

Why did they do that? To provide a cheaper and more scalable platform. It was a good trade-off for most of their customers.

But for the other customers, it was a hard pill to swallow because they had to leave a platform they were satisfied with.

Fortunately, the first version didn't stop right away and they had plenty of time to migrate to another provider.

From usage-based to plan-based pricing

For small websites, it was actually pretty cheap. I paid a couple of dollars a month making it cheaper than my other options.

But it could quickly get more expensive than the competitors. Usage-based pricing can also be very unpredictable, feedback customers gave them frequently.

So they decided to change to plan-based pricing. I mentioned one of the benefits of serverless was usage-based pricing. You would pay only for what you use. Without this pricing model, using serverless in their messaging didn't make as much sense anymore.

They added a generous free plan though, but their paid plan is necessary for some important features and starts at 20$/m. Not a problem for companies, but it alienated again some customers.

The new pricing model also included new limitations basically removing the ability to host fully-fledged backends. The focus on frontend engineers became more explicit.

A renewed focus

Next.js is now really popular and is used for over 35,000 sites at companies like Uber, Nike, and Starbucks.

Little by little, their open-source products improved to run better on their commercial product, and their commercial product changed to be a better fit for their open-source products.

But all these changes were not compatible with their initial positioning though. They needed to change.

That’s what happened in April of this year when they announced their new name, Vercel, and their new messaging.

Develop. Preview. Ship. Vercel combines the best developer experience with an obsessive focus on end-user performance. Our platform enables frontend teams to do their best work.

Clearly, a much more unique tagline and slogan with a properly defined ideal customer.

As painful deployments are a solved problem by many competitors, their initial positioning didn't hold a ton of value.

But it's still hard to find dev tools with a great developer experience and great performance. And, I think they have solved those pains with Next.js and Vercel (I said that as a former software engineer).

It's only by narrowing down their market that they were able to focus and become the best in terms of developer experience and performance.

Was it worth it?

It’s never easy to find the right path. Pivoting when you already have satisfied customers is tough. And when it comes to dev tools, changes often mean breaking stuff upsetting some customers in the process.

I've been pretty unhappy with the changes but when I look at where they are now, I feel like their future is bright.

Making frontends with Next.js hosted on Vercel is a very solid experience and now with better positioning and clearer strategic messaging, they are going to grow even faster.

What can we learn from this?

  • Open-source can be a great growth lever.

  • Usage-based pricing is hard to do without the right features to be alerted when usage goes beyond a certain point. For early-stage startups, it can be hard to implement and can irritate customers.

  • Despite narrowing down their ideal customer, they are growing rapidly, just raised 21M, and have more than 300,000 users.

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