InfoGraphic: Freemium Conversion Rate

"What is industry standard conversion rate from free to paid?"

On July 12th I will be speaking at the Freemium Meetup in San Francisco ( http://bit.ly/QVHOC3 ) and I may, or may not, answer this question. The question I will most likely answer is "We have built out an elaborate multi-sheet business model to get funding for our soon to be released freemium app. In Sheet 1 cell A1 should we put 50%, 5% or 0.5% as our conversion rate to the paid version?" And my answer will be...it depends. Some of the dependencies are outlined in the above infographic, which is a fabricated representation of multiple realities I have experienced over the past 12 years of working with companies that use freemium as a business strategy/tactic.

The take away here is, if people see value in your product -- if it addresses a need that has been unfulfilled or users were unaware they had -- then they will tend to convert to a more valuable version of your product at a higher rate (and lower cost). But if you have gone out and cut too good to be true acquisition deals or run wacky promotions to show hockey stick user growth to potential investors, don't bank on a measurable conversion rate. 

Evernote CEO Phil Libin has shared extremely interesting data about the value of their users http://bit.ly/LszKpv.  Tracking these user segments or cohorts (a cohort is essentially a user segment acquired or tracked over a specific time span) is critical for any freemium business. At Zone Labs we would assign unique registration codes that would track where the free product was downloaded (Web site vs. CNET vs. Earthlink, etc). We could then segment users by this code to assess the value of acquisition source. The trick is being able to track multiple segments in order to determine the ones with the biggest impact. If you have any questions or have experienced something interesting/unexpected during your segmentation testing that you'd like to share, please let me know. 


In a future post I will touch on driving revenue from free users beyond the conversion to paid model -- including pop-ads, data services, tool bars, lemonade stands and car washes.

C