

Going Freemium: One Year Later - merrick
http://www.mailchimp.com/blog/going-freemium-one-year-later/

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zzzmarcus
I use MailChimp for free right now but I can't wait until my list is big
enough for me to start having to pay them. It'll mean that I have enough
subscribers to actually monetize the list. At that point, I'll be more than
happy to give them my credit card.

This is in contrast with Evernote and Dropbox, both of which I use for free
but neither of which I plan of paying for in the future. They work well enough
for my needs, and if I grow out of them, I'll probably just either cut back on
my use or try to find another solution. Maybe that makes me a freeloader or
cheapskate, but I imagine I'm not alone.

So, at least in my case, Freemium works best for products that either directly
or indirectly contribute to making money.

~~~
dshah
I'd argue that freemium works best when the "premium" part has value for the
user. But, making money (i.e. directly contributing to revenue/profit) is just
one way to have value. Saving time is another.

So, I pay DropBox not because it helps me make money, but because it's worth
the savings in time and frustration trying to come up with an alternative.

Many of the most popular freemium products have a price point that is low
enough that large numbers of people can easily justify the price, if they
actually use the product.

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patio11
Profit up 650% in a year. Remind anyone of this the next time they start
talking about particular business types having patent on rapid growth.

~~~
mcdowall
Beermat maths...

With 20% of their user base (450k) on 10,000+ subscribers per month ($150 pcm)
I make that $13,500,000 per month.

And with that being 65% of their total revenue, they are making a cool $20m a
mth. Not bad, not bad at all.

Edit - forgot that not all 450k are paying, their maths state that 13.33%
(4,000 paying of 30,000) are paying. So actually they are making about $2,6m
per mth.

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Mike_McDerment
This is an amazing post. I've been at it for 7 years at
FreshBooks...experience tells me patience is more valuable than most people
building start ups want to believe.

~~~
zavulon
At a risk of harming myself, you guys might be giving too much stuff away for
free. I've been using Freshbooks for about a year for my small business, and
got most of my business partners to send me invoices through Freshbooks.

We are all still using a free account, and never had a need to switch over.
The free account just offers everything I need. I don't even know what would I
get with premium account - I never felt a need to check it out.

~~~
singer
What happens when you acquire your 4th client?

~~~
Mike_McDerment
you are asked to pay a monthly fee. you can use up to three for free for as
long as you like, but as soon as you need to manager four at the same time you
are prompted to a paying account.

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timf
I like MailChimp a lot but always dislike the "monkey" talk. Chimps are apes,
not monkeys.

~~~
wingo
I just came here to post in delight about his quote:

> I’ve worked in the stuffy corporate world. It was an extremely valuable
> learning experience, but it was so — stuffy. It needs more monkey.

But it was a fleeting moment of delight. Damn you timf :)

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fookyong
Interesting.

I just flipped the free plan back on over at: <http://goodgecko.com>

I'll write more about this on my blog soon, but in a nutshell my reasons were
thus:

1) It helps mitigate some marketing costs

2) I'd also rather the user tries out my app rather than the competition's :)

3) It shifts the focus of development slightly. I noticed that with the Free
Trial (that kicks into paid after 15 days) I was so focused on feeding
visitors through the funnel that all my time was being spent on the sales
funnel; building a nice sales site, setting up A/B tests, worrying about my
pricing etc. Changing to Freemium yesterday, I immediately got a bunch of
signups and my mind started focusing on the app again. The onus is now on the
app to be as awesome as possible in both free and paid versions. It's exposed
to more people. I think this is a better long-term situation as it will help
me focus on the right things, not just short-term funneling people into a Free
Trial to make $$$.

~~~
ericabiz
Slightly OT--but how does your product differ from just creating a survey in
Google Docs for free?

~~~
fookyong
Fair question.

In terms of big differences, I'd say that my app offers more ways to get
feedback.

You create one survey and then get multiple choices on how to use it:

1) web-based (this is like google docs)

2) mobile (optimised for iphones)

3) website popup - check out <http://goodgecko.com/tour/genie> for an example

and planning to follow it up with...

4) telephone surveys - created automatically and complete with robotic
synthesised voice!

5) ???

That's the philosophy. Create a survey, automatically get a bunch of different
ways to use it.

Thanks for the question though! Makes me think I should explain this better on
the site.

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jsankey
Great to read about success the "hard way" -- over the long term, and without
using free as a "hook" to bring in the initial users. And despite taking a
slow and patient route overall, they would have failed faster (if the idea
crashed) than if they had have gone freemium from the beginning.

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annajohnson
Great article that provides invaluable insights into Mailchimp's experience
with the freemium business model. We are using a freemium model with Domainer
Income (<http://www.domainerincome.com>). Now, we are still in the throes of
improving many aspects of the site and conversion funnel, etc but with regard
to the freemium model itself, it occurs to me that we have - and anyone
deploying a freemium model has - quite a few variables to play around with
that will impact the 10:1 ratio as well as overall conversions, sales,
profits, renewals, etc. For example, my experience and observations suggest
that you really need to provide overwhelming value in the paid version to get
people to upgrade. 'A little bit better' won't cut it. Also, you can
experiment with the actual free/paid service you provide. One thing we're
about to do is give everyone who signs up for a free membership a trial of the
premium service before they are 'dropped' back to the free account. These are
just two examples. On the other hand, having said this, I am also developing a
theory that you really have three target markets: freebie users who will never
upgrade, paid users who want the value-added services of the paid version, and
a group in between that will upgrade if they perceive enough value in doing
so. How big is the middle group, what will it take to convince them to
upgrade, is it cost-effective to try to persuade them? These are all
fascinating questions!

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dbrannan
I think there good business in helping other people make money, or at least
attempt to make money.

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cullenking
One thing I don't see people talking about is utilizing donations while
bootstrapping. The article correctly mentions that you need income (that 10%)
to pay the bills in order to develop a badass product. Donations can give you
that, as well as social proof that your idea is worth the potential act of
paying for it. Meaning, donors don't "receive" anything (subjective, I know),
but are still willing to support your great idea.

~~~
singer
You really think 10% of the users will donate? I'm thinking more like 0.01%
will donate.

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cullenking
Bit late to reply, but we have had > 300 donors last I checked, with 21k or so
users at that time. So, let's just say 1% - still good. Enough to give me
ramen profitability for the last four months.

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daveambrose
One of my favorite services, up there with Dropbox and Xmarks (which is now
shutting down).

Slightly off topic to Ben's post but did MailChimp ever raise financing?

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benchestnut
No. Unless you count a couple of small lines-of-credit with our local bank,
which we took as backup in case some initiatives failed (hiring an API
programmer, expanding the office, etc).

~~~
chopsueyar
Kudos to you. It is nice to read about a long-term successful company not
looking for an exit strategy.

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chopsueyar
Congratulations on your success and hardwork.

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grep
Impressive.

