OpenAI will replace a lot of software we use today. But I think there is a kind of apps that will will actually benefit from it: Luxury software. We’ve got things like fancy cars, designer clothes, and big houses. Luxury software? Not so much. But I think that’s about to change.
The perfect example might be Superhuman. I believe what makes Superhuman special is not just how quickly you can go through your inbox. When you use Superhuman, it feels like you’re using digital equivalent of a Porsche. There’s a delight in every detail. You can feel the considerate design choices. The ‘Sent from Superhuman’ signature’ is also a flex.
Let’s look at another example. Rize is a fairly expensive automatic time-tracker. It targets people who want to get the most out of every waking hour. They’ve got a big community of 4,000 on Discord. You know the crazier part? It’s made by just two people!
RIZE is a perfect example of luxury software. It makes your routine tasks fun via gamification, provides you with beautiful charts you can share for signaling, and tracks your time automatically with AI – all making it feel high-end. I see a lot of my friends in startups sharing their RIZE charts on social media. Watching them do that got me to try RIZE, and now I’m subscribed too.Most of the major tech players view these products as mere toys.
Tools like Rize have a relatively small market. And they lack moats that attract investors, like unique technology or network effects.Yet I think this is where small teams should focus on. Most people aren’t trying to build the next unicorn. They just want to make money doing what they love.
But why are we seeing luxury software become a viable business model now?
I believe it’s GPTs.
YouTube made dramatically cheaper to distribute videos to millions of people. Nowadays, people making videos just focus on creating awesome content, and YouTube takes care of the rest. This big change in how videos get out there has made a lot of content creators pretty wealthy.
A similar thing is happening to product development. GPTs are lowering the cost of building products by probably over 90%. This lets product makers target niche audience and still create a profitable business.
More people will also want luxury software. A lot of solo entrepreneurs and small teams are now hitting tens of thousands of monthly revenues. In the physical world, people buy fancier cars when they make more money. So, as we start to see more software millionaires, I bet they’ll spend more on fancy software too.
I would love to know how other members in the community think about this trend!
No.
I don’t think luxury software will or even can be a thing.
Software has vanishing marginal costs of replication.
Therefore, mass adoption of a consumer app will make way more revenue than high price low volume apps (b2b is a different story because of the ticket sizes).
But this means, mass market companies can afford better designers and better engineers and ultimately create the better product. That is why there will be no luxury software. If you pay more for a product, you want a better product. Otherwise the flex does not work and just makes you look dumb.
Additionally, most of the time, you also interact with software either alone (no one to flex to) or the other users are part of the value (a luxury instagram with no one to like your post does not make sense)
RIZE is pretty standard consumer saas pricing.
Superhuman only works because there is a subset of e-mail power users with requirements (i.e. shortcuts) that the mass market explicitly does not want (they want a clickable ui). So they found a niche with a higher willingness to pay. With the hefty pricetag, you could argue it’s luxury software, but my guess is, it’s mostly sales people and enterprise customers. And then we talk a b2b not a luxury use case. And it’s in a similar ballpark as Figma, Adobe and other b2b saas.
In the end the market dynamics of software (such as in media) inhibit the emergence of luxury software.
The only “luxury” apps I can see are such where low adoption of select people are part of the value prop. E.g. Elite Dating Apps. But here, The community rather than the software is the product.
Thanks for sharing this. It was a really insightful read and helped clear up a lot for me.
‘With the hefty pricetag, you could argue it’s luxury software, but my guess is, it’s mostly sales people and enterprise customers. And then we talk a b2b not a luxury use case. And it’s in a similar ballpark as Figma, Adobe and other b2b saas.
From what I’ve seen among my startup circles in S.Korea, Superhuman is pretty popular among the C-level executives. Superhuman has been testing a new ‘Superhuman for Sales’ feature. It looks like Superhuman is just starting to target the sales people and enterprise customers.
I would grant you the argument that superman is somewhat of a luxury app.
However, i think these will stay fringe and exceptions and not become a big thing. Like the 1k diamond iPhone app that did nothing.
C level executives are not paying superhuman out of their own pocket, it’s a company expense. They get a lot of emails because they are in jobs that receives a lot of emails.
I work in a startup and lots of people have superhuman paid by the company because it’s easier to manage emails and just saving a couple hours a month is enough to justify the cost.
This is it
Can confirm. I’m a founder and operator of an agency but have a lot of projects where I have multiple emails, lots of filtering to set up, and I’m a power user (ie hotkeys are my life). Superhuman is amazing. I’ve got my partners using it and our sales director. As soon as it’s more cost friendly I’d like to upgrade a lot of others to the platform.
For what it’s worth, I turn off the Sent with Superhuman. But god damn do I love it.
Politely disagree.
“Luxury” may be a strong word to describe such products, but “Premium” to “Ultra Premium” may be more apt labels.
There is a market for Premium software. That is, software well-made (as in darn near perfectly), best in class, and targeted at or near the top of the relevant market. Superhuman being a great example.
I agree that Rize is no where near luxury or even premium. haha. I believe lux to premium software would be charging bare minimum $50 / month, but probably something more like $100 to thousands per month. Though, also agreeing with you, the value won’t be in the software on it’s own, but in other benefits that are packaged within the product, both physical and non-physical. Non-physically, lux and premium products are typically packed with meaning, implicitly create social stratification, and relative incomparability to other products on the market.
All this can be made possible with software, though in this instance, the software is the facilitator or the means, but not the end of the story.
I think you can have luxury software, because we have luxury handbags, luxury watches, luxury perfume/cosmetics. The marginal cost of making things like cosmetics/perfume/handbags/watches are almost nothing compared to their retail prices as luxury goods.
People will pay $100/bottle for a perfume when it cost like $2 to make and distribute.
The economics of luxury goods is not about marginal cost, but about perceived value. Free software works if you have network effects and the value of the software increases with number of users like social networks. If there is little network effect, you can have a luxury niche in software just like you have with handbags/watches/perfume.
Another aspect of luxury is social status. I think this is where software falls short because people can’t easily see what software you use. Software doesn’t confer status the way handbags, watches do.
I think software can definitely have brand value. There are definitely associations with software you use. For example: Linux = hacker.
Luxury is ultimately about status and perceived value, not code/UI/usability.
But still the luxury handbag will be better than the non-luxury one. Whereas the luxury software will be worse, because the non-luxury brand can afford way more manpower to make it great. On the other hand, a luxury software company cannot afford the ad spend to increase brand perception.
The essence of the software business is the vanishing marginal cost. That is what makes the business model so great.
A luxury software essentially cuts itself out of the single most value generating market mechanism in the industry.
I don’t say luxury software is impossible. But I say that the market dynamics of the software industry are such, that the dominating players and vast majority of successful businesses (wrt. to revenue, size, cultural influence) will be mass market or specifically tailored b2b products. Not luxury goods.