Making “Freemium” Work

one of the chief purposes of freemium is to attract new users. If you’re not succeeding with that goal, it probably means that your free offerings are not compelling enough and you need to provide more or better features free. If you’re generating lots of traffic but few people are paying to upgrade, you may have the opposite problem: Your free off

you would do better to convert 5% of 2 million monthly visitors, for example, than to convert 50% of 100,000 visitors. The best long-term strategy is generally to aim for a moderate conversion rate (in my research, I’ve found that most companies’ range from 2% to 5%) coupled with a high volume of traffic. If you’re targeting a small market, you sho

Because free features are a potent marketing tool, the model allows a new venture to scale up and attract a user base without expending resources on costly ad campaigns or a traditional sales force.

Users who join late are typically harder to convert; therefore, in order to keep increasing upgrades, you’ll need to keep increasing the value of your premium services.

over time, conversion rates typically dip as the user base expands to include people who are more price-sensitive or who see less value in the service.

Early adopters are less price-sensitive than others, so they are more likely to upgrade. And often they are people for whom the value proposition is unusually compelling.

If customers don’t clearly grasp what they would gain by upgrading, you will monetize fewer of them than you otherwise might.