Are UK startups being priced out of innovation?

The current analytics pricing model presents a significant challenge for many UK startups. These companies, already grappling with reduced funding – down to $7.4bn in the first half of 2023, a 57% decrease from the previous year – find themselves in a precarious position where balancing costs against innovation is a constant struggle.

For startups, the journey of creating robust digital products is both challenging and costly. As a result, many turn to free analytics tools to guide their data-driven decisions. However, these freemium analytics models are often merely temporary solutions, ultimately leading to steep price increases. This environment forces startups to constantly assess the cost implications of their innovative efforts.

Free analytics tools, while initially cost-effective, can quickly become a financial burden as startups transition to paid services, often facing five-figure annual fees. The unpredictability of these costs can deter startups from even adopting free models. The prevalent event-based payment model, which charges per action within a product, is particularly problematic for startups. It’s challenging to estimate the volume of events and therefore the cost, penalising startups for their growth.

Spenser Skates, CEO of Amplitude, criticises this model: “The event model is broken. It's extremely difficult to know how many events you'll send, which makes understanding how much you'll pay impossible. You risk getting a massive surprise bill one month because you accidentally instrumented something incorrectly.

“This can lead you to ration the events you do track, undermining the whole purpose of analytics. When you don't instrument, you get less value from analytics and then end up wanting to track even less, which leads to less value and so on in a negative spiral.”

There is a pressing need for an overhaul of the analytics pricing structure. Startups require a pricing model that is both accessible and practical, allowing them to gain insights, test new features, and personalise customer experiences without prohibitive costs. This would enable startups to focus on building great products without the burden of juggling multiple expensive and complex solutions.

While freemium tools like Google Analytics offer some basic insights, they fall short in enabling startups to thoroughly understand factors driving user growth, conversion, monetisation, or retention. Limited tooling restricts teams to general trends across user bases, making it challenging to analyse specific user cohorts or individual experiences. Reliable data and actionable insights are crucial for startups to effectively enhance customer experiences.

Recognising its role in the existing problematic pricing landscape, Amplitude has responded to customer demands for a cost-effective, self-serve plan. The newly launched Plus plan, starting at $49 a month, offers comprehensive tools for analytics, customer data platforms, experimentation, and more. This plan represents Amplitude's commitment to making data more affordable and scalable over time.

Nick Newell, VP of Engineering at MySwimPro, shares his experience: “The main problem we were trying to solve was speed. And by bringing analytics and experiments into a single system, I was confident we could experiment, iterate, and improve faster. The good news is that I was right.

“Speed may be a top priority for the company, but as an engineer, quality comes first. Being able to monitor feature releases and changes in Analytics helped decrease our change failure rate from 30% to 6% and reduce our mean time to restore from 30 days to two days.”

This new plan is a step towards empowering startups with the tools they need for sustainable growth and innovation.