
Running a freemium web app? Here's a big reason we're growing. - itsderek23
http://blog.scoutapp.com/articles/2009/11/04/running-a-freemium-web-app-heres-a-big-reason-were-growing
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sadiq
Interesting that Scout isn't actually a freemium app by a strict definition
though.

At least, I can't see any free plans, only a 30-day trial.

I'm also intrigued by the difference in subscriber rates between freemium
webapps and freemium webgames.

[http://lsvp.wordpress.com/2008/06/09/successful-mmogs-can-
se...](http://lsvp.wordpress.com/2008/06/09/successful-mmogs-can-see-1-2-in-
monthly-arpu/)

The numbers from there vary from about 5% to 15%.

What can freemium webapps learn from freemium games?

~~~
scythe
>What can freemium webapps learn from freemium games?

Games have some advantages that can be hard for apps to replicate; games are,
in general, more social than typical applications. Games are also somewhat
more enviable. When I was 11, a few friends and I played RuneScape (remember
runescape?). After one of us got a paid membership, everyone else suddenly got
_way more interested_ in having a paid RuneScape membership. That is to say,
if one person gets a paid membership to a multiplayer online game, other
people in their social circle will probably be more likely to subscribe as
well.

Taking advantage of this with a webapp would require that you provide
something that someone either finds worthwhile showing off or something
conspicuous enough that they don't have to. The second condition applied for
Apple's iPod in the early part of the decade. It'd also probably be a good
idea to offer benefits to _groups_ of paid members as well as to individual
paid members.

~~~
dstorrs
I remember RuneScape, from ads in old Dragon magazines. But I always thought
it was a pen and paper game. Was it originally a P&P before going online, or
were the ads simply unclear?

~~~
scythe
I'm pretty sure it was always an online game played through a Java applet.
It's had a few incarnations, but overall it's still pretty similar to when it
started.

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patio11
The 1% paid signup rate, like the "1% of shareware downloaders pay", is
largely a non-scientific myth created to convey the general impression that
"Well, its low -- 1% sounds good, let's go with that".

I do about 2.45% on my trial signups these days and I'm hardly the most
successful guy at conversion optimization in the world.

Note that I quote it as a percentage of trial signups. As a percentage of
visitors it would be _wildly_ sensitive to whatever method you are using to
draw visitors to your site. If, for example, you're an early-stage startup
with no significant link equity but are experimenting with an AdWords
campaign, it is likely that most visitors came to your site responding to an
ad which told them a) what you offer and b) sign up for the free trial. Bam,
high conversion rates. If, on the other hand, you're a fairly established
business with lots of link equity and a developed SEO strategy, you're going
to be attracting folks across the spectrum from highly motivated to looky-loos
to some poor sap looking for ["Patrick McKenzie" geologist]. (He didn't sign
up for my trial. Rats?)

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viggity
I didn't quite understand: 1% off all his traffic, or 1% of the people who
sign up for the free version?

~~~
paraschopra
In my experience, it is more likely to be 1% of all traffic. Usually,
conversion rates are like this:

100 unique visitors => 10 free version users => 1 paid app user

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j_b_f
Of course, this rule is true for non-web-app businesses as well. Improvements
in quality increase the likelihood that customers will come back, and
returning customers usually have higher margins (due to lower sales & support
costs) than new acquisitions.

~~~
apsurd
Taking care of _existing customers_ increases the likelihood they will refer
you to their friends, thereby generating _new customers_. Most businesses
would do well to love and leverage their existing customer base.

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fjabre
Yeah this isn't freemium at all according to the pricing plans here:
<http://scoutapp.com/subscriptions>

Evernote is a much better example of a freemium model.

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mattmaroon
Wait a minute. You're telling me that if the number of people who stop paying
me goes down, I make more money? NO F'ING WAY!

Seriously, is this worth writing about? You should clearly optimize all three
relevant factors (traffic, conversion rates, and retention). 1% is not set in
stone, and you need only get to 1.5% to get the same 50% increase.

~~~
teej
The point he was getting across is that a 50% increase in signups leads to a
50% increase in revenue, whereas a 50% increase in retention is a 100%
increase in revenue. That fact isn't immediately obviously unless you do the
math.

~~~
mattmaroon
But it's entirely irrelevant because it may be more than twice as hard to
increase retention by 50%.

