(A) The committee approach: reduce the transfer fee to a very low level of $0.018 (~5 BTS) and thus effectively remove the transfer fee incentive from the referral program.
Consequences for businesses:
For a blog/website business (e.g. fav or Max Wright):
- there is no incentive to operate as there is almost no income (unless they manage to target advanced users, which is unlikely)
For a UI business (e.g. ccedk, kenCode or merivercap):
- there is almost no income from the referral program (unless they manage to target advanced users, which is unlikely)
- they have only one option: construct their own mechanism of charging higher fees and, if they do that, they get 100% of the profit
- the lowest *flat* transfer fee they can offer to their customers is $0.018
Consequences for the network:
- there is no revenue from non-advanced users (EDIT: I should have said: almost no revenue. The network gets 20% of each transfer fee but as the fee is extremely small this income becomes negligible)
- the number of LTMs sold drops substantially (only advanced users have a reason to buy it)
- as a result, the network's revenue stream drops substantially, as LTM upgrades currently make around 90% of the network's revenue
Conclusions: (1) blog/website business are lost, (2) each UI business needs to construct its own charging mechanism to survive and (3) the network's income definitely drops.
(B) My approach: reduce the transfer fee to a relatively low level of $0.04 (~12 BTS) and keep at least some of the transfer fee incentive in the referral program. Also, allow registrars to sell LTM at any price they want, provided the network always keeps a 20% cut.
Consequences for businesses:
For a blog/website business (e.g. fav or Max Wright):
- there is still an incentive to operate as they can count on the referral income from non-advanced users
For a UI business (e.g. ccedk, kenCode or merivercap):
- they have a real choice: they can opt out from the referral program by offering LTM for free and instead construct their own mechanism of charging higher fees to keep 100% of the profit OR they can stick to the in-built scheme and sell LTM for any price they find suitable for their customers (the downside is this: they only keep 80% of the profit and they risk that some of their users will try to buy LTM cheaper elsewhere and then migrate to use their apps)
- the lowest *flat* transfer fee they can offer to their customers is $0.008 (i.e. 50% less than the committee approach)
Consequences for the network:
- revenue from non-advanced users is preserved, as the network always gets 20% whenever the in-built referral program is used for non-advanced users
- the number of LTMs sold increases substantially as LTM prices are perfectly matched to what each customer is willing to pay
- it's hard to predict the net effect: on the one hand there might be some revenue lost due to getting on average less than 4k BTS for each LTM sold, but on the other hand there will be more LTM sold and the income from transfer fees will be substantially higher
Conclusions: (1) blog/website business are preserved, (2) UI businesses have a *real* choice and (3) the network's income is most likely preserved or even increased.