Nginx Pricing Model: Part 2

Nginx is on a quest to find the perfect pricing model. If they price too high, prospects turn elsewhere, if it’s too low, Nginx leaves money on the table, that comes in very handy for a startup. At first glance, the Nginx published website pricing, looks very similar to Red Hat Enterprise Linux. No surprises there, since the CEO worked at Red Hat for a decade.

Should Nginx price it’s web server software similar to Red Hat? Keep in mind that Red Hat offers Linux, virtualization technology, middleware, file systems, and products for the private cloud, public cloud, back office and data center. Red Hat products are not really used at CDNs; nor are they used by the Internet folks that are into LAMP, ruby on rails, python, Nginx, and so on. Nginx should not base its’ pricing solely on Red Hat products, since the Red Hat customer demographic is different than the Nginx target customer.

Nginx Competitor

There is one company that resembles Nginx more than any other one, Wowza. Wowza is known for the Wowza Media Server. Over the years, Wowza made the smart decision to expand its feature set for the Wowza Media Server; the new features include caching, load balancing, transcoding, support for DVR, and dashboards. Before that, setup was done via command line. Recently, Wowza Media Server changed its name to the Wowza Streaming Engine. My guess is Wowza realized the streaming market was small and crowded. They needed to attack a bigger market, so they develop more feature around Wowza.

Wowza is the best out-of-the-box streaming software server in the market today, for live streaming and VOD delivery; very much like Nginx is the best software for delivering small files, and large files that requires high concurrency. Nginx was built from the ground up to support high concurrency, to the tune of tens of thousands of concurrent users, running on a minimal memory footprint. Bottom line, Wowza and Nginx do the same thing, but support different file formats. Eventually, both products will cross over and compete with each other, as Nginx is now supporting streaming.

Price Comparison Chart: Red Hat, Nginx & Wowza
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Monthly Pricing for Nginx

Based on the pricing for Red Hat and Wowza, Nginx is in the ball park. It still needs a little work, but not too much. The first change that needs to take place, Nginx should “cloudify” its service by charging a monthly fee, not an annual software like fee. Take the $1350 and divide that by 12 months, and you get $112/month. Annual software purchase models are the old way of doing business, not the new way of the cloud. The purpose of the cloud is to make software like a utility that is paid monthly.

Nginx Price Reduction

The second change I would make, decrease the price for the Standard Service; instead charging $112 per month, make it $50 per month, a tad lower than Wowza. Of the 128M websites that are using Nginx, I bet the majority of them are small and price sensitive. Don’t leave out this customer segment with high prices. For the Premium Service, charge $75 per month. The target customer for the Premium Service are Telcos, Enterprises, and large Internet companies, that are not as price sensitive, and prefer the 24×7 support.

Why so low? Because the majority of Wowza users usually need 1 or 2 servers for video delivery, since each server supports 10Gbps+ of bandwidth, and 10k to 20k concurrent streams; not everyone is streaming the Olympics. The users of Nginx usually need many web servers, sometimes dozens, other times 100’s, for their content delivery needs. It’s not uncommon for a highly ranked Alexa website, to use hundreds of web servers.

Revenue Sample from New Pricing Model

If Nginx can sign up 3 million web servers from its 128M customer base, that amounts to $175 million in sales per month. Here is the math:

  • 2M Servers x $50/month $100M per month
  • 1M Servers x $75 = $75M per month
  • Total monthly revenue = $175 million

That my friends, equates to Akamai and Red Hat type market capitalization of $10B, give or take a few hundred million. Nginx, the ball is in your court.