Cloud Computing Company Joyent Leaves Early Supporters Out In The Cold

Back in 2006, cloud computing company Joyent offered a lifetime subscription to bundle of hosting services for a one time fee of $500. Now, according to an e-mail sent to customers, Joyent is pulling the plug on those lifetime accounts. Customers are predictably upset, but not for the reasons you might expect.

Here’s what’s going on: Joyent acquired a web hosting company called TextDrive back in 2005. TextDrive was founded in 2004 by Dean Allen, creator of the content management systems Textile and TextPattern, and Jason Hoffman. As Watts Martin explains, TextDrive sold lifetime subscriptions to customers to fund the company rather than raise venture capital. Customers felt like investors in the company. Drew McLellan wrote on Hacker News:

I was one of the original 200 to back TextDrive in with the VC200 accounts. The risk, of course, was that the venture wouldn’t be successful and we’d be laying out $200 for less than $200 worth of hosting. If they were successful, $200 would buy a reasonable shared hosting account for life.

Far from being naive and “falling” for the pricing model, my assessment was that
1) 200 shared hosting accounts (one server?) is a completely plausible lifetime offering for a successful hosting company, 2) $200 is a low risk punt, and 3) these are good guys and I think they can realistically make a go of it
TextDrive was a success, now continues to be a success as Joyent, and 200 shared hosting accounts (the state of play when I signed up) should be trivial for them to provide – even if they outsource that obligation to another provider.

Joyent followed that tradition and continued to offer lifetime accounts after it acquired TextDrive, including the above mentioned offer that said the services would be available “As long as we exist.”

It’s not that customers haven’t gotten their money’s worth. TextDrive shared hosting service was priced at $12 a month in 2006. That means five years of that service alone would be worth $720. Joyent went back on its word to offer the lifetime service “as long as we exist,” but that’s not the only issue here. The real issue is that the customers felt like investors, even if they didn’t have a formal investment relationship. Joyent has gone from a small hosting company to one of the big names in cloud computing and just closed $85 million round of funding last year. The people who helped them get to that point by putting up cash feel like they’re being left out in the cold.

I asked Joyent for comment and their representative pointed me to a forum post by Hoffman, who is now CTO of Joyent. “It’s ironic that our biggest advocates are the ones most affected by this and I know many of you are disappointed in me,” he wrote. And: “We’re only here because of the initial community that trusted us, and I’m genuinely grateful for the support. I’m sorry that I’ve lost that trust and I’ve upset you. You have a right to be upset.”

So why make this decision then? Joyent’s business has fundamentally changed since the TextDrive days. Today it sells higher end cloud hosting services, not commodity shared web hosting. Hoffman writes:

Making the decision to discontinue the service was extremely difficult. It was driven by some simple things: the hardware is simply old (6-8 years old), it’s failing, there isn’t an upgrade path from it, there’s more than many of you likely realize and oddly enough it’s more expensive with time (while not being used much). The rest of the Joyent’s business has been paying for that, and I can’t make the argument as to why it can continue.

What lessons can be learned from this? Instapaper creator Marco Arment writes: “Anyone who bought this should be annoyed, but buyers should also blame themselves for casting insufficient skepticism on the deal in the first place. Nothing in this business is ever truly ‘unlimited’, and ‘lifetime’ never means your lifetime.” (Instapaper sells a mobile app for a one time fee, but also runs ads on the web version to make money.)

But again, the real issue isn’t the money. The users got their money’s worth. It’s the fact that they were used as investors and are now being left out in the cold. Companies eying Kickstarter and other alternative ways of raising money should look at this situation and be careful what they promise or risk alienating the very supporters that got you off the ground. And customers should be wary of investing in for-profit companies that will only offer cheap, commodity services as a pay off.

Correction 5:47 EST 03/04/14: An earlier version of this story incorrectly identified Jason Hoffman as the co-founder of both Joyent and TextDrive. He is only the co-founder of TextDrive.