Mvelopes vs. YNAB, Part 3: Customer-Driven over Business Plan-Driven Software

When Annie and I started using Mvelopes back in 2002, it was a Windows program that simply allowed you to divide your monthly income into envelopes and then download your transactions to your computer. The software was $35 or so to use and I don't remember having a monthly fee to download transactions. It worked well for us; we managed to survive the first two years of marriage and some career changes for Annie.

The problem with this, for the makers of Mvelopes, was that they weren't making as much money as they wanted. In software, one-time revenue won't get you where you need to be, most of the time. What you need is recurring revenue. For example, if you can charge a customer a few dollars a month, they'll end up paying hundreds over a few years time. If you charged them fifty bucks instead, you're missing out on a lot of money.

So the makers of Mvelopes (in2m, renamed to finicity) decided that their Windows program wasn't the best way to do this. People expect software on their computer to not continue to charge them for use. But software over the internet is a different story. The software is now running on the company's servers, and with all the expense that creates, we can charge you $15 a month to use the software. So Mvelopes moved their software (in my opinion) from a windows-based platform to a web-based platform primarily because it solved their business needs.

I remember back when they were moving to a web platform (probably 2004ish) I called them one day and they were so excited that you can finally drag and drop a transaction into its envelope. I wanted to scream to them that they were completely distracted from serving their customers; they needed to provide a solid, usable system for managing money. Drag and drop was not going to help this. Their problem was that they were comitted to their business plan over serving their customers. Now, don't get me wrong, their business plan involved serving their customers, but it was the primary driver in their software, not the needs of the customers. And that remains through today. This makes Mvelopes frustrating to use: you have a crappy Mobile Phone Browser access to Mvelopes because developing an iPhone application is outside of their business plan. You have an Adobe (who-knows-what-technology-this-is) nightmare of a platform where everything is slow and must be done with the mouse. You have features that don't have an overall philosophy because their overall philosophy is to drive recurring revenue up through as many people as possible. And the number of subscribers they're trying to get eliminates the niche market that YNAB creates. Which is why I've switched.

YNAB takes a different approach. I really get the impression that the creator of YNAB primarily cares about creating budget software that works for people who are serious about budgeting. My impression is that everything else (revenue, new features, etc.) serves that end. So you get a program that runs on your machine. You get an xml data file that you could do anything you wanted with. You get a single priced license with minimal upgrades. You get a plan that works for people like me, who want to spend some extra time and energy getting our financial world in order and can use some direction. He's not trying to be a millionare, first. And because of all this, this guy is going to be very successful.

In the future, he might need to change his business plan and try to drive some recurring revenue. Or he may need to charge for some yearly upgrades that include new features, and possibly add a maintenance plan for people to get a lot of updates every year. But the truth would still hold that this isn't the first thing he went for. He went for a niche market and nailed it. And since I am in that niche market, that makes me very happy.