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Summary:

[qi:045] Meraki Networks, a Mountain View, Calif.-based mesh networking gear maker, which is leading the unique ComMuniFi model of providing wireless broadband access in communities, neighborhoods and small cities, has quietly launched a new three-tier business model that may boost the revenues, but it also might […]

[qi:045] Meraki Networks, a Mountain View, Calif.-based mesh networking gear maker, which is leading the unique ComMuniFi model of providing wireless broadband access in communities, neighborhoods and small cities, has quietly launched a new three-tier business model that may boost the revenues, but it also might alienate some of its existing customer base. The problem: 2x increase in price of some of its gear from $50 to $150 per wireless router.

As part of the new plan has Meraki now will offer gear and services tailored to three market segments – Standard (for community and individuals wanting to set up free networks), Pro and Carriers. As part of this change, the company is going to increase the price of its gear by as much as 200 percent, a move that impacts its customers in the Pro-tier.

The Pro-tier includes property owners and small network and hot-spot operators, who are currently using Meraki to offer for-pay wireless broadband. The price increase has some of their customers, especially those who are currently operating Meraki-based networks, up in arms. They will now have to pay $150 per Meraki router versus $50 they paid previously.

Many of them were lured by the low cost of Meraki gear, in addition to the superlative technology, and the company runs the risk of alienating some of those customers. “It is no longer the cost effective system it was credited to be,” wrote one poster on the Meraki forums, while another lamented, “[What] a shame ….. drawn in by a cost effective method just to be slapped in the face by an uncaring company that used us as pawns.”

“This is part of the business evolution of the company,” says Sanjit Biswas, co-founder and CEO of the company that has raised venture capital backing from Google (GOOG) and Sequoia Capital. This is a dilemma that is faced by most projects that have roots in open source but eventually have to evolve into a for-profit business.
Biswas justified the price increase because it comes with other benefits such as guaranteed support. The company will also start selling its gear through the channel in addition to direct sales, and needed to boost prices. I am not sure about the magnitude of the price increase.

Biswas explained that company has envisaged lot of interest from Internet Service Providers and carriers, especially those outside of the US, and that is why the company is introducing a “carrier edition” of its products. The price for devices being used to power free community networks remains unchanged at $50, though the company is going to include advertising on the landing pages for these networks.

The advertising move shouldn’t come as a surprise. Last month, Sonic.net, a Bay Area ISP had started offering wireless broadband using Meraki gear, and that offering included advertising as part of the package. Of course, given Google’s investment in the company, it isn’t hard to connect the dots.

“This is still an experiment, and if it works, then we can see advertising revenues subsidizing the hardware costs,” Biswas said. There are plans to share advertising revenues with network operators as well.

Related: Our previous coverage of Meraki.

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  1. I was never good at math, but I think you mean a 3x increase in price or a 200% increase in price. Either way it leaves a bad taste.

  2. google » Meraki Price Hike Irks Customers Monday, October 8, 2007

    [...] Check it out! While looking through the blogosphere we stumbled on an interesting post today.Here’s a quick excerptMeraki Networks, a Mountain View, Calif.-based mesh networking gear maker, which is leading the unique ComMuniFi model of providing wireless broadband access in communities, neighborhoods and small cities, has … [...]

  3. Sanjit Biswas Monday, October 8, 2007

    A note from Meraki — we launched the new editions quietly so we could get an additional round of feedback before setting things in stone. Our platform was designed with input from the thousands of Meraki networks around the world, and we’re listening to everyone’s comments to understand how we can make sure this becomes the world-changing thing everyone would love it to be.

    We designed the new Pro edition for the network operators who serve hotels, apartments and other commercial settings. Over the last year we’ve been told our products are a great fit for the segment, but that most of these venues can’t be reached directly by us. As a result, we’ve tried to create a new offering that will help create an ecosystem of trained installers/resellers around the world that also has an additional level of support and service.

    We’re definitely keeping the $50 product so more individuals/groups can spread free Internet access through their communities. Long term, we hope targeted advertising will create a new model for access worldwide, so we’ll be exploring that (with help from our customers) as we continue to grow.

    Thanks,
    Sanjit

    CEO and Co-Founder, Meraki

  4. Dear Sanjit,

    Meraki is being more than just ‘quietly’. You didn’t even bother to inform your customers that these major changes were underway. Not a very nice thing to do, to say the least. Not the slightest e-mail or communication on the blog either, even as we speak.

    Openness in communication is all the more important in the Meraki case, because people investing in ‘dumb’ terminals need to have faith in the ‘smart’ internet management platform you provide with them. The hardware doesn’t work without the management tools, so you’re asking a lot of trust! If you keep changing the rules or become too greedy, people will loose that trust. Even now, it’s hard to imagine that large network implementers would lay their eggs in the uncertain Meraki-basket.

    There are in my opinion a number of adjustments that need to be made to the new value proposition (which isn’t all bad, mind you). Some examples: You don’t charge differently (3 times the price!) for the same hardware: it feels unnatural. Make people pay an extra monthly fee for a service level upgrade (and make it downgradable, while you’re at it).

    And, most importantly: loose the obligatory advertising bar for Pro networks. It’s just not right, and you know it.

  5. Daniel Pentecost Monday, October 8, 2007

    Sanjit,

    I’m one of those annoyed Meraki customers. I was even invited to Hans’ WebEx on Wednesday. It didn’t dawn on me until we all saw the changes take place that the rug was effectively being pulled out from under us.

    I don’t think you or your team did it intentionally. But when you’re dealing with WiFi projects, those don’t just happen overnight. It’s not like someone walking into BestBuy and buying a router. There is planning, budgeting and prospecting required.

    For just 1 of my networks, this change translates into a $7,000 overnight price increase. That’s $7,000 out of a non-profit ministry’s budget you’re trying to take. They already have 12 nodes in place and we were on track to have 72 in place by year end.

    I’m assuming you’ve never worked within a non-profit or community organization before… so let me clue you into something. They operate by yearly budget. Which means that there is no extra $7,000 laying around to use to complete this project. That means we’ll most likely have to abandon it, liquidate the equipment and start all over. They can’t afford the Pro edition pricing. And personally, I have a problem with them paying for Pro just to get a couple admin features they need to manage their free network.

    Next time around, why don’t you engage the Meraki community before you release to the public? You have quite a vibrant forum community on your own website and on several others around the internet.

    This time around you basically knifed your most ardent supporters in the back and you still haven’t apologized yet. If you think they’re going to to trust you again very easily, you’re in for a rude awakening. Early adopters are fickle. You only get 1 chance to screw up.

  6. Sanjit Biswas Monday, October 8, 2007

    Hi Kristof, Daniel,
    We’re in the process of updating the editions based on the feedback we got over the weekend. The advertising toolbar is completely optional on the Pro version (we were either unclear or inconsistent, and apologize) and we’re building a new local sponsor landing page for the community networks.

    Daniel, we take our customers’ trust very seriously and understand the implications of providing a hosted service. We certainly have no intentions of switching things out under our customers and apologize if it seemed that way — you’re under no obligation to upgrade to the new offering, and are still welcome to extend your network under the original pricing. Our goal is to shift to a model that’s compatible with resellers & installers, with the intent of reaching markets that we don’t have access to. We’ve also been working with many non-profits like NetEquality and OneEconomy from day one, and want to make sure our products can still be deployed in those markets and make a difference to the people who really benefit from affordable or free access.

    Aside from the update, we’re sorry if it seemed like we blindsided our early adopters and hope to regain your trust over time. Over the past few months, we’ve worked with nearly a thousand customers to understand how our products are being used in the field, and we tried to do a low-profile launch so we would have an opportunity to tweak the feature lists before finalizing them.

    In the future, we’ll try hard to provide additional communication before any chances and to be as transparent as possible.

    Thanks,
    Sanjit

  7. Meraki Listens, Makes Changes To Their Biz Model « GigaOM Monday, October 8, 2007

    [...] Written by Om Malik Monday, October 8, 2007 at 9:10 PM PT | No comments Meraki Networks, the Mountain View, Calif.-based company that makes mesh networking gear is listening to its community, and tweaking its new three tier business model in an effort to appease some of their customers. We were among the first to bring attention to the brewing discontent. [...]

  8. Daniel Pentecost Monday, October 8, 2007

    Sanjit,

    Just to make one point public and clear, those of us with Legacy networks were repeatedly told after the change that “we could expand our existing networks by adding Pro nodes.” Meaning if we want to expand our existing networks, we have to pay the new 2x higher equipment prices or lose features. In my one case, $7,000 of unbudgeted additional expense.

    I have neither heard this position change nor read it in your remarks. Your own FAQ states: http://meraki.com/oursolution/editions/faq/

    “I have an existing Legacy network. I want to grow this network, what are my options?

    You have two options:

    1. Go to Dashboard->Configure and upgrade your network to Pro. There is no charge for the upgrade. Then add Pro Edition nodes to your Pro network.
    2. Add Pro nodes to your Legacy network.”

    Thus, the only way we could continue to utilize all of the features to which we have access as Legacy customers is become a defacto Pro network – meaning paying $100 extra per hardware unit than what we budgeted and expected.

    In order to continue to use the hardware at the prices we expected and budgeted for, we have to downgrade ourselves to Standard. Even with your tweaks to the editions, Legacy users still lose features and functionality by moving to Standard.

    By “you’re under no obligation to upgrade to the new offering, and are still welcome to extend your network under the original pricing,” are you publicly committing that Legacy users can add standard nodes to their network and have full Legacy functionality?

    If so, we’d like to see that statement spelled out in plain English in your Editions Update thread:
    http://forums.meraki.com/viewtopic.php?t=1931

    Somehow I think you’ll eventually want to stop supporting Legacy with feature set and firmware updates. What then?

    Some call this the law of unintended consequences. I call it “no good deed goes unpunished.”

    I don’t think Meraki changed things with any sort of malice. I know your VC money and investors wanted a clearer path to profitability. But a “low-profile” launch that takes immediate affect, removes existing functionality from current users, and doubles the price of the hardware isn’t how I’d suggest you give it to them.

    Blessings,
    Daniel P.

  9. Dear Sanjit,

    To set the record straight: the advertising panel wasn’t optional yesterday in the pro plan. There is no doubt about that. Here’s your communication on that matter:

    Yesterday:

    Can I disable the Community Messaging & Advertising Platform in the Pro edition?

    No. The platform is always on for users on a Standard or Pro network. However, Network Operators on their own Private Access Tier will not see the community messaging toolbar.

    Today:

    Can I disable the Messaging & Advertising Platform in the Pro edition?

    Yes, in the Pro Edition, the Network Operator has the ability to disable the messaging toolbar in both the Private and Public access tiers. For the Standard edition, the messaging toolbar will always be on in the public network, however Network Operators can disable the messaging toolbar in their own Private Access Tier.

    I applaud the changes you’ve made, but I wish you’d go a bit further and add premium plans for premium features. Don’t charge differently for the same hardware, it won’t work. The added value does not reside in the hardware, it’s in the services.

    Kind regards, Kristof

    PS: I still can’t see the switch on/off button in my dashboard panel for the advertising platform ;-)

  10. Wired iPod » Blog Archive » Meraki price hikes leave some customers disillusioned Tuesday, October 9, 2007

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