11 ms·

How to Kill a Unicorn

272 points by chrisfrantz 6y ago

tromp 6y ago
Plenty people arguing for a free plan in the "Don't Offer a Free Plan" thread https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517
jitl 6y ago
I whole-heartedly agree with this post! I like the emphasis on value vis a vis the free tier upgrade path. Here’s an anecdote about Notion that I posted on the related HN topic “Don’t offer a free plan” [https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517], [original post: https://news.ycombinator.com/item?id=26060141 https://news.ycombinator.com/item?id=26060141] ————— At Notion, we used to have a limited free plan where we only allowed users to create 1000 blocks (pages/paragraphs/embeds/checkboxes/database rows) before we directed them to upgrade to the "Personal Pro" plan. Supporting free users dealing with the block limit was a major headache, just as described in the OP, but more importantly the Personal Pro plan was kind of a dead end - few users converted to Pro, and those that did weren't worth much, since the Pro plan is pretty cheap and doesn't have much network effect. We took a hard look at that free personal plan and how it worked with our goals. Instead of phasing it out, we decided to make it unlimited - now personal users can make as many blocks as they want [https://www.notion.so/personal https://www.notion.so/personal]. But importantly, we also switched up our segmentation at the same time: we restricted the personal plans' collaboration model and created a new "Team Trial" plan, with the same 1000 block limit, but with all the teamwork features included. Another thing to note about our Team Trail is that it's not time-limited at all, teams can keep trialing Notion until it has clear value to them. We have many fewer users frustrated by the block limit, but those who are are much more valuable, and are getting a lot more out of Notion -- when they upgrade, it's to a Team plan with strong network effects and a path to future expansion. And all those (now) very happy users on the free plan? They're like jonpurdy [https://news.ycombinator.com/item?id=26059666 https://news.ycombinator.com/item?id=26059666] - they'll take Notion into their (future) teams and workplaces, even though in the shorter term they're a strain on our systems. My advice is - there's more nuance to this than "MAKE IT FREE" vs "DON'T MAKE IT FREE". Think about how you structure upgrade incentives around value, and about how your free plans fit into your overall market strategy.
- lmeyerov 6y ago
  Slack was the "aha" for me on understanding an underlying mechanism here for freemium->paid. Freemium needs to cover trialing up until the point of an adoption decision. However, the adoption decision isn't about continuing to use the tool. We're in a 'prosumer' world, so the purchasing decision flip is instead about when a user both operationally and mentally phases from b2c -> b2b, meaning changes both in how they're using it and the value they're noticing. Ex: In Slack's case, it is a team liking it enough that they start having substantive conversations, and when prompted, view paying for a search history to be more than reasonable for a work environment. If they aren't getting commercial value from those comms, they can keep using for free until they do. Ex: In ^^^ Notion's case, a 1000 block limit may not signify anyone cares beyond entertainment value. But as soon as you want to do secure sharing with colleagues for a lot of work, you're probably doing valuable stuff, and are fine paying as long as reasonable. Ex: Twilio is ~free for developers as they prove value, but org pays when it gets real. So it is less about trialing -> addicted, and more about trialing -> committed & appreciates generated work value. The lazy version of this is "addicted individual -> addicted team", so I expect pricing models to roughly follow that. Sort of like a modern version of "Enterprise means SSO so charge more for that", except now more closely aligned with utilization... which is a good thing.
  - mattbuilds 6y ago
    Slack is the one that clicked for me as well. I used it with some friends just to try it out. Then at work our small team used the free version, without anyone's permission, just to play around and see how we liked it. Turns out another team did the same thing and we decided to merge the workspaces. Then some upper level people got wind, saw it was going well, and soon after the entire 200 person company was on it. Not saying our team was responsible for the purchase, but it clearly helped Slack gain a foothold as "a tool we use".
  - naravara 6y ago
    To build off this a little more, another pattern I see pretty often is for people to pilot things on personal projects and then, when they come on board a team, suggest their favored personal toolkits at work. Simply creating the familiarity with the tool can help enormously in this case, even if it would probably take a couple of years or more to really pay dividends. I've found this to especially be the case with new hires who are fresh out of college or graduate school. They have experience setting up platforms for the group projects they do in school and they can often work pretty well for a small team if implemented with intention. It's not actually so different from Adobe's strategy of somewhat turning a blind-eye to piracy from college students knowing that when they graduate into being design professionals they'll have business expenses they're willing to splurge with.
arthurofbabylon 6y ago
While most of the thought within this article is totally accurate and very useful, it’s important to acknowledge that killing a unicorn is even more rare than finding a unicorn. It’s important to acknowledge that freemium is a high-risk strategy requiring a lot of “just right” environmental circumstance.
alexh1 6y ago
This is a nice article, echoes my thoughts a little better than the other post [1] on thd front page right now. That said, there are strong competitors to Google Analytics, that's the one take I don't agree with. With Portabella (https://portabella.io https://portabella.io) we've gone the restricted free tier route. As a bootstrapped company we have to make that tradeoff between wanting users but also safe guarding against abuse. 1. https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517
- jamil7 6y ago
  Cool product, I think I've seen it pop up on HN before. How do you balance user privacy while collecting data on usage? Do you have your own privacy-friendly event tracking system, maybe something self hosted?
  - alexh1 6y ago
    Are you referring to the analytics tracking (a la Google Analytics) or enforcing limits on user activity? For a GA alternative there are many and what you should look for is an analytics provider (if you don't want to self host) that rotates salts. Basically user ip hashed with a random salt that changes every 24 hours is good enough to protect user privacy while allowing you to not count every page view as a unique session. Of course everyone is counted as a new visitor after 24 hours. On the rate limiting side, great question. I'm currently writing a series of blog posts around creating your own privacy friendly products (Part 1 is targeted at apps, part 2 will be SaaS) where I'll cover this in detail. Here's a few key takeaways, if you can provide something without collecting any user data, do it. However for anything involving payment you need to at least know the users email (leaving aside cryptocurrency, I'm a big fan but it's difficult to accept as a bootstrapped business). Additionally rate limiting based on usage (which you therefore need to track) is kind of a given. The best we can do here is make sure user data is encrypted.
    - jamil7 6y ago
      Thanks for the detailed answer, I was refering more to the analytics and tracking side of things, seeing how often a certain feature was used for instance while maintaining a users privacy and anonyminity. But I was interested to read how you implemented the rest too and the overall approach.
deleted 6y ago
[deleted]
polote 6y ago
That's a very naive article, pricing strategy is almost never the reason a company succeed. Some companies offers a free plan some don't. In both of those case some companies are successful. If you are wondering what pricing strategy you should do, just do whatever you feel is the good way. Usually in b2b enterprise there is no free plan, but look at Segment they have a free plan. Usually in b2b smb there is a free plan (I can't think of one which don't have it). And usually in b2c there is a free plan , but look at Netflix they don't have one
- raverbashing 6y ago
  Netflix has a 30-day trial though. (Which is fine to explore what it does) So I guess the solution is to have a way to have your customer test your product in a thorough way.
- Cederfjard 6y ago
  It doesn’t necessarily follow that just because some companies do it one way and some do it the other, it doesn’t matter. There can be a lot of other factors at play.
amzans 6y ago
I have offered a free plan for my SaaS from day one, with quite generous limits, on a niche with mostly paid-only alternatives. I think it comes down to tradeoffs. As a self-funded solo founder, this has helped me gain many users since launch, which give me plenty feedback and help to validate new product features without having lots of marketing effort so far. I don't sell any data, or display ads on free accounts. The reason to upgrade is more capacity, or complementary features for business users (e.g. alerts or organisation/team accounts). That said, a couple of things to consider: - Do your numbers: if you have 100 free users for every paying customer, are you going to be profitable? Can you handle the costs? - In my experience, free users tend to attract more free users. - They can generate a lot of support pressure, but handled right can be a great way to understand your customers problems. Handled wrong can kill you. - Expect a small percentage of free users to cause the most trouble. From creating several accounts with different email addresses, to publicly complaining about the free plan being limited, to requesting lots of features only to switch to another free product once it's time to upgrade. - If you're targeting B2B, price might not be as much of a factor as you might think. Are you going to save or make money for other businesses? I could talk more about this, but will probably write a blog post one day with more learnings once I have them. I’m happy to offer a free plan as long as it’s sustainable and I can see the benefits. So far it’s going great for me, but know what you’re getting into, and be sure you can handle the costs both in time and money with low conversion rates vs a trial model. Edit: I moved the comment to this discussion as it's more fitting. I removed the link to my product.
- polote 6y ago
  Are you going to continue deleting and recreating this comment until it is upvoted ? It is the 3 times I see you creating and deleting this comment, in either this thread or in the other one on the front page on the pricing strategy. You were already flagged for bad behavior there https://news.ycombinator.com/item?id=25322651 https://news.ycombinator.com/item?id=25322651
  - amzans 6y ago
    Let me come clean: I moved my comment to where I thought the discussion is still happening. I have something to say and would like to share my learnings to discuss with other people here. Please don't try to shame others, it doesn't help anyone. Be kind: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
start123 6y ago
Here's my improved answer from previous - "Don't offer free plan" post. I recently shut down my free plan and instead introduced Trial on paid plans for my SAAS [1]. Brought in a new entry-level plan that is significantly cheaper to make the transition easier. As an indiehacker, the free plan allowed me to iron out bugs and improve the overall experience of the platform. But the amount of effort it took to maintain the free plan was enormous so, I shut it down. I informed users about the decision and, I am glad few converted to being paid customers. The most difficult part was to convert free users into paid ones. I tried everything - Coupons, discounts, emailing customers, lowering the limits, limited offers etc. Nothing really worked. I have a lot of free time now and I can focus on delivering value to my customers. The server load has also reduced due to the reduction of free requests and database writes/reads. For a large SAAS company like Slack, Trello etc, it makes sense to have a free plan since you have a lot of resources at your disposal but, if you are a small team or worse alone, then hell no. [1] http://blanq.io/ http://blanq.io/
janlukacs 6y ago
A key aspect of free is the A-Ha moment your users have while using the product. With simple products this moment can be achieved quickly (like watching Netflix for a couple of days, you see the value really fast), with complex products this moment can take quite a while. In our work management SaaS [1] it takes quite some time to see the actual value of the product, we constantly see people converting from free after a year of use :) What I'm trying to say it, there's no magic formula - you need to understand as well as you can your user base, see how long it usually takes them to understand that you do provide value with the product and importantly check out what your competitors are offering in terms of free plans. [1] https://www.paymoapp.com https://www.paymoapp.com
Jugurtha 6y ago
Does the article conflate overtaking an incumbent's product in market share and overtaking it in Google trends? I don't think these are the same things. They would if both relied almost exclusively on Google searches / ads / SEO as a channel, but I don't think Adobe sells the same as the other companies. It may not care about Google trends / SEO because it does enterprise deals. They have the sales people to do that. Adobe has gone +50% from 2020 to 2021, and the trend seems to keep going up. I'm not attributing that to Photoshop, though. Second, a company may have millions of users and still have no/little/less revenue. This also often would mean no support. That could be fine with a certain category. Many of the companies cited in the article are private companies, so we don't really know much about their finances. >Microsoft Teams: Slack >Well...they don’t. Baremetrics sold. Slack sold. You can’t compete against freemium when you’re able to offer the primary value for free. The existing market leaders can’t match your pricing without giving up millions in recurring revenue and they’re not going to do that. Slack does have a free tier. Am I misunderstanding the paragraph as meaning that Slack lost because it didn't have one? The freemium model can be interesting if an additional user is one entry in a database, and you don't incur that much cost from usage. For example, we make a machine learning / MLOps (oh yeah) platform at https://iko.ai https://iko.ai. Users train models models on data, which means GPU, RAM, and storage. Unless you are venture backed and can spend money on free users to onboard a lot of users fast, it's not sustainable. We're not venture backed, and we're not really looking to be for now, which means our clients belong to a different segment. Now, it is not excluded that the revenue generated thanks to these paying customers will subsidize free users, and we are engineering our way out of this conundrum. But someone has to pay for all that compute. One of our colleagues was supervising about thirty students doing their final year projects in machine learning, and we let them use our platform to be able to complete their projects and get their degrees. We provided support that you'd find in an enterprise offering, and we spent a lot of nights hanging out in the Slack channels helping them troubleshoot and optimize their code, giving guidance on how to train and use the models, seeing it through their graduation. You can't really generalize that level of support for all free users, and when it came to students, we couldn't just shrug it off and not support them just because they were free users, as this was personal.
- twelvechairs 6y ago
vemv 6y ago
Probably the simplest middle ground between do/don't offer a free plan is: offer a free plan, but be very clear that any kind of support, feedback, contact etc can only be reached via a paid subscription. This works well in e.g. AWS where I often temporarily pay for a subcription while I'm having an issue. This weeds out for them many low-value, high-maintenance users. (AWS in particular cannot be very blunt so it's still possible to get support without paying specifically for it... but when running a small business, please be blunt)
gnicholas 6y ago
When it comes to freemium, what are the pros/cons of doing a limited-time (but fully-featured) free trial, versus a feature-limited (but not time-limited) free tier?
- polote 6y ago
  The answer is in the question: - If you are offering a free trial, you want all your users to be customers - If you are offering a free tier you bet your free users will either: become customers at some point or create some free marketing for you I don't know if there are pro/cons, there are just times when you need one, and times when you need another. If you sell something really expensive, you can't put a free tier for example. It is always difficult to quantify the marketing aspect of things.
- piracy1 6y ago
  I'd think mostly that you could make free too good and everyone just uses that. But if everyone is using ur app, then you have a userbase and you could start monetizing them.
- mojuba 6y ago
  Depends on the product of course, but I think a safe generalization (coming from my experience) would be that free trials have better conversion rates compared to limited indefinite free ones. Should be noted, a limited version should still provide some value, i.e. a version of the app that doesn't save documents doesn't count because its usage in time is artificially limited by the functionality. People seem to tend to stick and extract maximum possible value from indefinitely free plans, put up with and work around the limitations. It's a strange phenomenon but the way people evaluate $0 vs. non-$0 products seems irrational. Possibly because we can't seem to accurately estimate the time we waste on working around limitations on a free product vs. the money we would have paid for a fully functional product, i.e. estimate the time wasted in terms of money lost.
shaan7 6y ago
> Massive Market Opportunity Ah boy do I wish reading an article like this few years back. This point is exactly what we missed when offering a Freemium plan to users. It doesn't work for products that, by design, are built only for a specific set of users. > First, if you are missing even one of these, it might not be the pricing strategy for you Yup. Freemium is for you only if you can to tick _ALL_ of those boxes.
- Hoasi 6y ago
  > It doesn't work for products that, by design, are built only for a specific set of users. Exactly, freemium does not make sense if you have a limited niche of potential users.
raghuveerdotnet 6y ago
Copy pasting my answer from "Don't offer a free plan": When it comes to B2C, prescriptions don't apply uniformly, or for that matter scale. Beware. My only suggestion would be that be honest with the value proposition of your product. Know that your electron-based note-taking tool is not the same as the entire g-suite or ms office. And finally, remember that no one is more emotionally invested in your product than you are. So let the suggestions trade.
rafaelturk 6y ago
I'm in! Free users are the loudest, they complain about everything and are a huge distraction.
renke1 6y ago
What I try to do for my application, all offline features are free and features that talk to the backend are paid. Of course that won't work for every type of application. The idea is that only paying customers generate any cost (aside from bandwidth to serve the application resources). For example, full-text search would be paid features, while a simple search that can be done reasonably on the client would be free.
tasn 6y ago
Free plans sometimes work and sometimes don't. A good example of where they (at least seem) to work well is Calendly. Every time you use the service you advertise it (even when on the free plan), and if I had to guess, a good amount of people eventually become paying.
onethought 6y ago
First sentence threw me... who have Canva unseated?
davidkuennen 6y ago
I offer freemium in my b2c app https://stockevents.app https://stockevents.app with a hard limit on the amount of stocks the user can put on their watchlist and its working great. 10% of my active users are paid users.
arvindamirtaa 6y ago
Gotta love hackernews!
betwixthewires 6y ago
Is this a response to the "Don't offer a free plan" article floating around here somewhere? Reading them both, it seems the other one is written by a developer and this one is written by a marketing person. The marketing person probably knows more about this then a developer would, but it is fun to see their perspectives. The developer doesn't want to deal with free users demanding resources and the marketer wants to position the product to be profitable. Personally I trust developers more than marketing people, and I generally have a bit of disdain for marketing folks. They market their trade as exposing the right product to the right audience, but usually what it amounts to in substance is manipulating people. Still, the marketing person's perspective on this particular topic is important to consider.
- deleted 6y ago
  [deleted]
- PaulHoule 6y ago
  I think of it this way. If I was buying some software for work that costs (say) $500 the process involves many steps, including convincing myself I want it and concincing my boss to pay for it (usually.) It could take days to give a product a fair evaluation but I have to consider the probability is (say) 30% that I get it in the end, so that the invested time might be "wasted". Say I spend 2 days on eval and I get paid $50 an hour, that is $800 worth of time which I could spend on project work, or 'sharpening the saw' in some other way. If I have to look at four products to buy one I am spending $2400 of time to buy a $500 product. So I think of free trials as 'free as in puppy'.
  - mooreds 6y ago
    Hmm. But don't you still have to evaluate the solutions whether you have a free trial or not? It's not like a product without a free trial is magically going to work for you; you still have to test it out, correct? (Or do I misunderstand?) If that is the case, then anything which makes it easier to evaluate will make it easier to purchase. If you have to choose between a free trial and spending $500 for a month to evaluate, won't you pick the free trial, even if you are spending $800 of your time to evaluate? The context I'm coming from is that my current employer has a full featured, forever free offering aimed squarely at developers: an auth/user management system (link in bio if you are curious). The paid offerings have better support and premium features. Our thesis is that for a focused developer tool (rather than a tool that can be used by non technical users, which are many of the examples in the original post) you need to lower the barrier to entry. Integrating with an auth system is more of a commitment than picking a different tool to create images or manage an email list. It's like picking a database. I think the original article did a great job of talking about where freemium works (big market, virality, etc), but didn't cover all the places where freemium works, in particular dev tools.
seanwilson 6y ago
Whether to go with a freeium model is another "it depends" topic and there's too many factors to give general advice, the same for questions like "How much should I charge for my product?", "What's the best way to market my product?" and "What framework should I use to code my product?". I run a freeium Chrome extension (https://www.checkbot.io/ https://www.checkbot.io/) for checking website SEO, speed and security factors where I have the free plan without sign up for multiple reasons 1) low friction so users can try it out first 2) users may be more likely to share and recommend it for quickly checking website issues 3) there's free tools in this space so it may be harder to ask for payment upfront. I'm generally not finding the cost of the free users high. For another product though, all these factors might be weighted differently which would tip the balance on a free tier making sense. It depends on too many things e.g. marketing budget, competitors (how entrenched they are, how much they offer for free), how much a user needs to try out your product before they realise they need it, differences between free and paid plan, if your product appeals to teams or individuals, support costs.
- atoav 6y ago
  This. If you offer something very very simple where the way it is being done is much more important than what it is (e.g. a innovative text editor that solves precisely the same problems as other text editors but in a slightly more convenient fashion) then offering a free tester makes a ton of sense. There is too many text editors out there and getting people to understand why they should even consider paying money for yours is a important part of getting the money in the first place. When your product however solves a very unique problem and is the only product that does that, you don't really need to do such a thing, because the why is self explainatory. E.g. you wrote a format converter that allows users to transfer basic audio projects between all kind of proprietary DAWs. This is so self explaining that only people who have a pressing need to solve that problem will pay for it anyways. And because there is not too much competition in that market you don't have to demonstrate why your solution is slightly better than $trustedopensourceprogram
baxtr 6y ago
I love the freemium model for SaaS because it's an easy way to start and test a SaaS before buying into it. Also, when you start small, you don't have that much money at hand. It feels fair to pay once you have established your business at a larger scale.
foxhop 6y ago
You get what I'm trying to do here with my recent essay: https://www.remarkbox.com/remarkbox-is-now-pay-what-you-can.html https://www.remarkbox.com/remarkbox-is-now-pay-what-you-can....
inthewoods 6y ago
I think this article is an example of attribution error. To conclude that it is a free model that has caused Canva, Figma, or Notion to take the lead is missing on multiple fronts. To me, the more likely conclusion about these products is that they were better products, and that they created fundamentally different user interactions. I can't remember where I read it, but I read a great article that argued that Google Docs was successfully not because it duplicated Microsoft Word (many had tried and failed with this approach), but because it focused on how work had changed and the need for collaboration. Canva is very, very successful, but I don't think that's at Adobe's expense. By any measure, Adobe is probably one of the best examples of a company shifting to SaaS: https://producthabits.com/adobe-95-billion-saas-company/ https://producthabits.com/adobe-95-billion-saas-company/. Also, regardless of whether they offered their products in a SaaS model (Adobe introduced them in 2012 I believe), there was still free trial. Maybe a better explanation is that Canva tapped into a different audience - people that needed to produce graphics but did not have design capabilities. On Figma, it seems to me to be a better online collaboration design tool than what has been offered by other companies. The author seems to forget that companies like InDesign existed at the same time, offered a collaborative tool, and had a similar freeium offer. I won't belabor the point - freeium might have helped these companies succeed, but I think it is a big leap to say freeium = unicorn killer.
- tppiotrowski 6y ago
  Anecdotally, my main reason for switching to Google docs was that Office was $$$$. A lot of people collaborate but I doubt it’s anywhere near the majority. Would you use Google docs if it cost $200 a year?
  - villasv 6y ago
    And why did you choose Google Docs over LibreOffice or OpenOffice or something else also free? Not because the product was better?
    - TeMPOraL 6y ago
      LibreOffice & OpenOffice are so bad that converting Markdown to .docx via Pandoc is a better option even for non-technical users.
karmakaze 6y ago
This is an interesting post that puts more thought and words into something I would consider doing but don't have any depth of understanding. I may not agree with all the points and certain cases may be counterexamples but I very much appreciate having it clearly presented to be discussed or evaluated for a purpose. For my own reference, quote: > How Freemium really works [...] > In reality, there are a number of different ingredients in the recipe you need to nail before you can actually execute a freemium strategy effectively. You don’t need a team of hundreds of people, but it does help to lay out the strategy ahead of time. > Let's break out the different factors involved in setting up a freemium plan. - Pricing that scales with usage - Shareable content - In-app upsells - Massive market opportunity - Pricing innovation on the primary value > First, if you are missing even one of these, it might not be the pricing strategy for you. Each part is key in building out a converting freemium funnel.
dariusj18 6y ago
Who has to google "photoshop"? Also, Canva seems more like a "Publisher" killer. But Publisher was already dead.
- Strom 6y ago
  > Who has to google "photoshop"? A great question that I think must be considered. I use Photoshop all the time, but definitely don't google for it. Search trends are not a 1:1 match for usage. That said, the Google trends for basic terms like water and food are still on the rise, even though I think they suit the question Who has to google this? even better.
nbzso 6y ago
Yet another marketing article masquerading as an "expert opinion". The real reason Figma wins over Sketch, which is superior as a design tool, is not the freemium. Multiplatform availability and collaboration are the selling points. But if Figma wants to expand market share, soon or a later they must go native.
- jamil7 6y ago
  Interesting take. I haven't used either Sketch or Figma that extensively for quite a while, so take my opinion with a grain of salt. It was my feeling that Figma lacked some of the finess in terms of finer vector drawing and advanced features that Illustrator or Sketch provided but was "good enough" in 99% of use-cases that it didn't realistically matter to their target customers. There are some parallels to the Google Docs X Word relationship I think. Edit: I read your comment wrong and removed part of mine to make sense. We're basically in agreement.
evouga 6y ago
I’d never heard of Canva before and, taking a quick look, based on its feature set I don’t see it as a competitor to Photoshop or Illustrator really. Canva seems all about taking an existing template and swapping in some new photos and text. Of course, this is very useful and I’m sure there’s a huge market for such functionality when creating Instagram posts, etc. But it’s very different from full-featured image editing (photoshop) or authoring complex vector graphics (illustrator).
sheriffderek 6y ago
I'm going to create a "Free" service where you can just "freely" choose to stop creating these totally useless and backward pieces of production art. Then, you might see the unicorn out there in the mist... the UX person who can actually just "make the prototype" and the design system - instead of inspiring hundreds of useless meetings to deliberate over a flat perversion. I like paying for things. Good things. And when I pay for good things... (and they are managed well) - they inspire people to make more good things. This whole "Free" thing... is costing us all - big time.

272 points by chrisfrantz 6y ago

Plenty people arguing for a free plan in the "Don't Offer a Free Plan" thread https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517

jitl 6y ago

I whole-heartedly agree with this post! I like the emphasis on value vis a vis the free tier upgrade path. Here’s an anecdote about Notion that I posted on the related HN topic “Don’t offer a free plan” [https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517], [original post: https://news.ycombinator.com/item?id=26060141 https://news.ycombinator.com/item?id=26060141] ————— At Notion, we used to have a limited free plan where we only allowed users to create 1000 blocks (pages/paragraphs/embeds/checkboxes/database rows) before we directed them to upgrade to the "Personal Pro" plan. Supporting free users dealing with the block limit was a major headache, just as described in the OP, but more importantly the Personal Pro plan was kind of a dead end - few users converted to Pro, and those that did weren't worth much, since the Pro plan is pretty cheap and doesn't have much network effect. We took a hard look at that free personal plan and how it worked with our goals. Instead of phasing it out, we decided to make it unlimited - now personal users can make as many blocks as they want [https://www.notion.so/personal https://www.notion.so/personal]. But importantly, we also switched up our segmentation at the same time: we restricted the personal plans' collaboration model and created a new "Team Trial" plan, with the same 1000 block limit, but with all the teamwork features included. Another thing to note about our Team Trail is that it's not time-limited at all, teams can keep trialing Notion until it has clear value to them. We have many fewer users frustrated by the block limit, but those who are are much more valuable, and are getting a lot more out of Notion -- when they upgrade, it's to a Team plan with strong network effects and a path to future expansion. And all those (now) very happy users on the free plan? They're like jonpurdy [https://news.ycombinator.com/item?id=26059666 https://news.ycombinator.com/item?id=26059666] - they'll take Notion into their (future) teams and workplaces, even though in the shorter term they're a strain on our systems. My advice is - there's more nuance to this than "MAKE IT FREE" vs "DON'T MAKE IT FREE". Think about how you structure upgrade incentives around value, and about how your free plans fit into your overall market strategy.

lmeyerov 6y ago
Slack was the "aha" for me on understanding an underlying mechanism here for freemium->paid. Freemium needs to cover trialing up until the point of an adoption decision. However, the adoption decision isn't about continuing to use the tool. We're in a 'prosumer' world, so the purchasing decision flip is instead about when a user both operationally and mentally phases from b2c -> b2b, meaning changes both in how they're using it and the value they're noticing. Ex: In Slack's case, it is a team liking it enough that they start having substantive conversations, and when prompted, view paying for a search history to be more than reasonable for a work environment. If they aren't getting commercial value from those comms, they can keep using for free until they do. Ex: In ^^^ Notion's case, a 1000 block limit may not signify anyone cares beyond entertainment value. But as soon as you want to do secure sharing with colleagues for a lot of work, you're probably doing valuable stuff, and are fine paying as long as reasonable. Ex: Twilio is ~free for developers as they prove value, but org pays when it gets real. So it is less about trialing -> addicted, and more about trialing -> committed & appreciates generated work value. The lazy version of this is "addicted individual -> addicted team", so I expect pricing models to roughly follow that. Sort of like a modern version of "Enterprise means SSO so charge more for that", except now more closely aligned with utilization... which is a good thing.
- mattbuilds 6y ago
  Slack is the one that clicked for me as well. I used it with some friends just to try it out. Then at work our small team used the free version, without anyone's permission, just to play around and see how we liked it. Turns out another team did the same thing and we decided to merge the workspaces. Then some upper level people got wind, saw it was going well, and soon after the entire 200 person company was on it. Not saying our team was responsible for the purchase, but it clearly helped Slack gain a foothold as "a tool we use".
- naravara 6y ago
  To build off this a little more, another pattern I see pretty often is for people to pilot things on personal projects and then, when they come on board a team, suggest their favored personal toolkits at work. Simply creating the familiarity with the tool can help enormously in this case, even if it would probably take a couple of years or more to really pay dividends. I've found this to especially be the case with new hires who are fresh out of college or graduate school. They have experience setting up platforms for the group projects they do in school and they can often work pretty well for a small team if implemented with intention. It's not actually so different from Adobe's strategy of somewhat turning a blind-eye to piracy from college students knowing that when they graduate into being design professionals they'll have business expenses they're willing to splurge with.

arthurofbabylon 6y ago

While most of the thought within this article is totally accurate and very useful, it’s important to acknowledge that killing a unicorn is even more rare than finding a unicorn. It’s important to acknowledge that freemium is a high-risk strategy requiring a lot of “just right” environmental circumstance.

alexh1 6y ago

This is a nice article, echoes my thoughts a little better than the other post [1] on thd front page right now. That said, there are strong competitors to Google Analytics, that's the one take I don't agree with. With Portabella (https://portabella.io https://portabella.io) we've gone the restricted free tier route. As a bootstrapped company we have to make that tradeoff between wanting users but also safe guarding against abuse. 1. https://news.ycombinator.com/item?id=26059517 https://news.ycombinator.com/item?id=26059517

jamil7 6y ago
Cool product, I think I've seen it pop up on HN before. How do you balance user privacy while collecting data on usage? Do you have your own privacy-friendly event tracking system, maybe something self hosted?
- alexh1 6y ago
  Are you referring to the analytics tracking (a la Google Analytics) or enforcing limits on user activity? For a GA alternative there are many and what you should look for is an analytics provider (if you don't want to self host) that rotates salts. Basically user ip hashed with a random salt that changes every 24 hours is good enough to protect user privacy while allowing you to not count every page view as a unique session. Of course everyone is counted as a new visitor after 24 hours. On the rate limiting side, great question. I'm currently writing a series of blog posts around creating your own privacy friendly products (Part 1 is targeted at apps, part 2 will be SaaS) where I'll cover this in detail. Here's a few key takeaways, if you can provide something without collecting any user data, do it. However for anything involving payment you need to at least know the users email (leaving aside cryptocurrency, I'm a big fan but it's difficult to accept as a bootstrapped business). Additionally rate limiting based on usage (which you therefore need to track) is kind of a given. The best we can do here is make sure user data is encrypted.
  - jamil7 6y ago
    Thanks for the detailed answer, I was refering more to the analytics and tracking side of things, seeing how often a certain feature was used for instance while maintaining a users privacy and anonyminity. But I was interested to read how you implemented the rest too and the overall approach.

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polote 6y ago

That's a very naive article, pricing strategy is almost never the reason a company succeed. Some companies offers a free plan some don't. In both of those case some companies are successful. If you are wondering what pricing strategy you should do, just do whatever you feel is the good way. Usually in b2b enterprise there is no free plan, but look at Segment they have a free plan. Usually in b2b smb there is a free plan (I can't think of one which don't have it). And usually in b2c there is a free plan , but look at Netflix they don't have one

raverbashing 6y ago
Netflix has a 30-day trial though. (Which is fine to explore what it does) So I guess the solution is to have a way to have your customer test your product in a thorough way.
Cederfjard 6y ago
It doesn’t necessarily follow that just because some companies do it one way and some do it the other, it doesn’t matter. There can be a lot of other factors at play.

amzans 6y ago

I have offered a free plan for my SaaS from day one, with quite generous limits, on a niche with mostly paid-only alternatives. I think it comes down to tradeoffs. As a self-funded solo founder, this has helped me gain many users since launch, which give me plenty feedback and help to validate new product features without having lots of marketing effort so far. I don't sell any data, or display ads on free accounts. The reason to upgrade is more capacity, or complementary features for business users (e.g. alerts or organisation/team accounts). That said, a couple of things to consider: - Do your numbers: if you have 100 free users for every paying customer, are you going to be profitable? Can you handle the costs? - In my experience, free users tend to attract more free users. - They can generate a lot of support pressure, but handled right can be a great way to understand your customers problems. Handled wrong can kill you. - Expect a small percentage of free users to cause the most trouble. From creating several accounts with different email addresses, to publicly complaining about the free plan being limited, to requesting lots of features only to switch to another free product once it's time to upgrade. - If you're targeting B2B, price might not be as much of a factor as you might think. Are you going to save or make money for other businesses? I could talk more about this, but will probably write a blog post one day with more learnings once I have them. I’m happy to offer a free plan as long as it’s sustainable and I can see the benefits. So far it’s going great for me, but know what you’re getting into, and be sure you can handle the costs both in time and money with low conversion rates vs a trial model. Edit: I moved the comment to this discussion as it's more fitting. I removed the link to my product.

polote 6y ago
Are you going to continue deleting and recreating this comment until it is upvoted ? It is the 3 times I see you creating and deleting this comment, in either this thread or in the other one on the front page on the pricing strategy. You were already flagged for bad behavior there https://news.ycombinator.com/item?id=25322651 https://news.ycombinator.com/item?id=25322651
- amzans 6y ago
  Let me come clean: I moved my comment to where I thought the discussion is still happening. I have something to say and would like to share my learnings to discuss with other people here. Please don't try to shame others, it doesn't help anyone. Be kind: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

start123 6y ago

Here's my improved answer from previous - "Don't offer free plan" post. I recently shut down my free plan and instead introduced Trial on paid plans for my SAAS [1]. Brought in a new entry-level plan that is significantly cheaper to make the transition easier. As an indiehacker, the free plan allowed me to iron out bugs and improve the overall experience of the platform. But the amount of effort it took to maintain the free plan was enormous so, I shut it down. I informed users about the decision and, I am glad few converted to being paid customers. The most difficult part was to convert free users into paid ones. I tried everything - Coupons, discounts, emailing customers, lowering the limits, limited offers etc. Nothing really worked. I have a lot of free time now and I can focus on delivering value to my customers. The server load has also reduced due to the reduction of free requests and database writes/reads. For a large SAAS company like Slack, Trello etc, it makes sense to have a free plan since you have a lot of resources at your disposal but, if you are a small team or worse alone, then hell no. [1] http://blanq.io/ http://blanq.io/

janlukacs 6y ago

A key aspect of free is the A-Ha moment your users have while using the product. With simple products this moment can be achieved quickly (like watching Netflix for a couple of days, you see the value really fast), with complex products this moment can take quite a while. In our work management SaaS [1] it takes quite some time to see the actual value of the product, we constantly see people converting from free after a year of use :) What I'm trying to say it, there's no magic formula - you need to understand as well as you can your user base, see how long it usually takes them to understand that you do provide value with the product and importantly check out what your competitors are offering in terms of free plans. [1] https://www.paymoapp.com https://www.paymoapp.com

Jugurtha 6y ago

Does the article conflate overtaking an incumbent's product in market share and overtaking it in Google trends? I don't think these are the same things. They would if both relied almost exclusively on Google searches / ads / SEO as a channel, but I don't think Adobe sells the same as the other companies. It may not care about Google trends / SEO because it does enterprise deals. They have the sales people to do that. Adobe has gone +50% from 2020 to 2021, and the trend seems to keep going up. I'm not attributing that to Photoshop, though. Second, a company may have millions of users and still have no/little/less revenue. This also often would mean no support. That could be fine with a certain category. Many of the companies cited in the article are private companies, so we don't really know much about their finances. >Microsoft Teams: Slack >Well...they don’t. Baremetrics sold. Slack sold. You can’t compete against freemium when you’re able to offer the primary value for free. The existing market leaders can’t match your pricing without giving up millions in recurring revenue and they’re not going to do that. Slack does have a free tier. Am I misunderstanding the paragraph as meaning that Slack lost because it didn't have one? The freemium model can be interesting if an additional user is one entry in a database, and you don't incur that much cost from usage. For example, we make a machine learning / MLOps (oh yeah) platform at https://iko.ai https://iko.ai. Users train models models on data, which means GPU, RAM, and storage. Unless you are venture backed and can spend money on free users to onboard a lot of users fast, it's not sustainable. We're not venture backed, and we're not really looking to be for now, which means our clients belong to a different segment. Now, it is not excluded that the revenue generated thanks to these paying customers will subsidize free users, and we are engineering our way out of this conundrum. But someone has to pay for all that compute. One of our colleagues was supervising about thirty students doing their final year projects in machine learning, and we let them use our platform to be able to complete their projects and get their degrees. We provided support that you'd find in an enterprise offering, and we spent a lot of nights hanging out in the Slack channels helping them troubleshoot and optimize their code, giving guidance on how to train and use the models, seeing it through their graduation. You can't really generalize that level of support for all free users, and when it came to students, we couldn't just shrug it off and not support them just because they were free users, as this was personal.

twelvechairs 6y ago

vemv 6y ago

Probably the simplest middle ground between do/don't offer a free plan is: offer a free plan, but be very clear that any kind of support, feedback, contact etc can only be reached via a paid subscription. This works well in e.g. AWS where I often temporarily pay for a subcription while I'm having an issue. This weeds out for them many low-value, high-maintenance users. (AWS in particular cannot be very blunt so it's still possible to get support without paying specifically for it... but when running a small business, please be blunt)

gnicholas 6y ago

When it comes to freemium, what are the pros/cons of doing a limited-time (but fully-featured) free trial, versus a feature-limited (but not time-limited) free tier?

polote 6y ago
The answer is in the question: - If you are offering a free trial, you want all your users to be customers - If you are offering a free tier you bet your free users will either: become customers at some point or create some free marketing for you I don't know if there are pro/cons, there are just times when you need one, and times when you need another. If you sell something really expensive, you can't put a free tier for example. It is always difficult to quantify the marketing aspect of things.
piracy1 6y ago
I'd think mostly that you could make free too good and everyone just uses that. But if everyone is using ur app, then you have a userbase and you could start monetizing them.
mojuba 6y ago
Depends on the product of course, but I think a safe generalization (coming from my experience) would be that free trials have better conversion rates compared to limited indefinite free ones. Should be noted, a limited version should still provide some value, i.e. a version of the app that doesn't save documents doesn't count because its usage in time is artificially limited by the functionality. People seem to tend to stick and extract maximum possible value from indefinitely free plans, put up with and work around the limitations. It's a strange phenomenon but the way people evaluate $0 vs. non-$0 products seems irrational. Possibly because we can't seem to accurately estimate the time we waste on working around limitations on a free product vs. the money we would have paid for a fully functional product, i.e. estimate the time wasted in terms of money lost.

shaan7 6y ago

> Massive Market Opportunity Ah boy do I wish reading an article like this few years back. This point is exactly what we missed when offering a Freemium plan to users. It doesn't work for products that, by design, are built only for a specific set of users. > First, if you are missing even one of these, it might not be the pricing strategy for you Yup. Freemium is for you only if you can to tick _ALL_ of those boxes.

Hoasi 6y ago
> It doesn't work for products that, by design, are built only for a specific set of users. Exactly, freemium does not make sense if you have a limited niche of potential users.

raghuveerdotnet 6y ago

Copy pasting my answer from "Don't offer a free plan": When it comes to B2C, prescriptions don't apply uniformly, or for that matter scale. Beware. My only suggestion would be that be honest with the value proposition of your product. Know that your electron-based note-taking tool is not the same as the entire g-suite or ms office. And finally, remember that no one is more emotionally invested in your product than you are. So let the suggestions trade.

rafaelturk 6y ago

I'm in! Free users are the loudest, they complain about everything and are a huge distraction.

renke1 6y ago

What I try to do for my application, all offline features are free and features that talk to the backend are paid. Of course that won't work for every type of application. The idea is that only paying customers generate any cost (aside from bandwidth to serve the application resources). For example, full-text search would be paid features, while a simple search that can be done reasonably on the client would be free.

tasn 6y ago

Free plans sometimes work and sometimes don't. A good example of where they (at least seem) to work well is Calendly. Every time you use the service you advertise it (even when on the free plan), and if I had to guess, a good amount of people eventually become paying.

onethought 6y ago

First sentence threw me... who have Canva unseated?

davidkuennen 6y ago

I offer freemium in my b2c app https://stockevents.app https://stockevents.app with a hard limit on the amount of stocks the user can put on their watchlist and its working great. 10% of my active users are paid users.

arvindamirtaa 6y ago

Gotta love hackernews!

betwixthewires 6y ago

Is this a response to the "Don't offer a free plan" article floating around here somewhere? Reading them both, it seems the other one is written by a developer and this one is written by a marketing person. The marketing person probably knows more about this then a developer would, but it is fun to see their perspectives. The developer doesn't want to deal with free users demanding resources and the marketer wants to position the product to be profitable. Personally I trust developers more than marketing people, and I generally have a bit of disdain for marketing folks. They market their trade as exposing the right product to the right audience, but usually what it amounts to in substance is manipulating people. Still, the marketing person's perspective on this particular topic is important to consider.

deleted 6y ago
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PaulHoule 6y ago
I think of it this way. If I was buying some software for work that costs (say) $500 the process involves many steps, including convincing myself I want it and concincing my boss to pay for it (usually.) It could take days to give a product a fair evaluation but I have to consider the probability is (say) 30% that I get it in the end, so that the invested time might be "wasted". Say I spend 2 days on eval and I get paid $50 an hour, that is $800 worth of time which I could spend on project work, or 'sharpening the saw' in some other way. If I have to look at four products to buy one I am spending $2400 of time to buy a $500 product. So I think of free trials as 'free as in puppy'.
- mooreds 6y ago
  Hmm. But don't you still have to evaluate the solutions whether you have a free trial or not? It's not like a product without a free trial is magically going to work for you; you still have to test it out, correct? (Or do I misunderstand?) If that is the case, then anything which makes it easier to evaluate will make it easier to purchase. If you have to choose between a free trial and spending $500 for a month to evaluate, won't you pick the free trial, even if you are spending $800 of your time to evaluate? The context I'm coming from is that my current employer has a full featured, forever free offering aimed squarely at developers: an auth/user management system (link in bio if you are curious). The paid offerings have better support and premium features. Our thesis is that for a focused developer tool (rather than a tool that can be used by non technical users, which are many of the examples in the original post) you need to lower the barrier to entry. Integrating with an auth system is more of a commitment than picking a different tool to create images or manage an email list. It's like picking a database. I think the original article did a great job of talking about where freemium works (big market, virality, etc), but didn't cover all the places where freemium works, in particular dev tools.

seanwilson 6y ago

Whether to go with a freeium model is another "it depends" topic and there's too many factors to give general advice, the same for questions like "How much should I charge for my product?", "What's the best way to market my product?" and "What framework should I use to code my product?". I run a freeium Chrome extension (https://www.checkbot.io/ https://www.checkbot.io/) for checking website SEO, speed and security factors where I have the free plan without sign up for multiple reasons 1) low friction so users can try it out first 2) users may be more likely to share and recommend it for quickly checking website issues 3) there's free tools in this space so it may be harder to ask for payment upfront. I'm generally not finding the cost of the free users high. For another product though, all these factors might be weighted differently which would tip the balance on a free tier making sense. It depends on too many things e.g. marketing budget, competitors (how entrenched they are, how much they offer for free), how much a user needs to try out your product before they realise they need it, differences between free and paid plan, if your product appeals to teams or individuals, support costs.

atoav 6y ago
This. If you offer something very very simple where the way it is being done is much more important than what it is (e.g. a innovative text editor that solves precisely the same problems as other text editors but in a slightly more convenient fashion) then offering a free tester makes a ton of sense. There is too many text editors out there and getting people to understand why they should even consider paying money for yours is a important part of getting the money in the first place. When your product however solves a very unique problem and is the only product that does that, you don't really need to do such a thing, because the why is self explainatory. E.g. you wrote a format converter that allows users to transfer basic audio projects between all kind of proprietary DAWs. This is so self explaining that only people who have a pressing need to solve that problem will pay for it anyways. And because there is not too much competition in that market you don't have to demonstrate why your solution is slightly better than $trustedopensourceprogram

baxtr 6y ago

I love the freemium model for SaaS because it's an easy way to start and test a SaaS before buying into it. Also, when you start small, you don't have that much money at hand. It feels fair to pay once you have established your business at a larger scale.

foxhop 6y ago

You get what I'm trying to do here with my recent essay: https://www.remarkbox.com/remarkbox-is-now-pay-what-you-can.html https://www.remarkbox.com/remarkbox-is-now-pay-what-you-can....

inthewoods 6y ago

I think this article is an example of attribution error. To conclude that it is a free model that has caused Canva, Figma, or Notion to take the lead is missing on multiple fronts. To me, the more likely conclusion about these products is that they were better products, and that they created fundamentally different user interactions. I can't remember where I read it, but I read a great article that argued that Google Docs was successfully not because it duplicated Microsoft Word (many had tried and failed with this approach), but because it focused on how work had changed and the need for collaboration. Canva is very, very successful, but I don't think that's at Adobe's expense. By any measure, Adobe is probably one of the best examples of a company shifting to SaaS: https://producthabits.com/adobe-95-billion-saas-company/ https://producthabits.com/adobe-95-billion-saas-company/. Also, regardless of whether they offered their products in a SaaS model (Adobe introduced them in 2012 I believe), there was still free trial. Maybe a better explanation is that Canva tapped into a different audience - people that needed to produce graphics but did not have design capabilities. On Figma, it seems to me to be a better online collaboration design tool than what has been offered by other companies. The author seems to forget that companies like InDesign existed at the same time, offered a collaborative tool, and had a similar freeium offer. I won't belabor the point - freeium might have helped these companies succeed, but I think it is a big leap to say freeium = unicorn killer.

tppiotrowski 6y ago
Anecdotally, my main reason for switching to Google docs was that Office was $$$$. A lot of people collaborate but I doubt it’s anywhere near the majority. Would you use Google docs if it cost $200 a year?
- villasv 6y ago
  And why did you choose Google Docs over LibreOffice or OpenOffice or something else also free? Not because the product was better?
  - TeMPOraL 6y ago
    LibreOffice & OpenOffice are so bad that converting Markdown to .docx via Pandoc is a better option even for non-technical users.

karmakaze 6y ago

This is an interesting post that puts more thought and words into something I would consider doing but don't have any depth of understanding. I may not agree with all the points and certain cases may be counterexamples but I very much appreciate having it clearly presented to be discussed or evaluated for a purpose. For my own reference, quote: > How Freemium really works [...] > In reality, there are a number of different ingredients in the recipe you need to nail before you can actually execute a freemium strategy effectively. You don’t need a team of hundreds of people, but it does help to lay out the strategy ahead of time. > Let's break out the different factors involved in setting up a freemium plan. - Pricing that scales with usage - Shareable content - In-app upsells - Massive market opportunity - Pricing innovation on the primary value > First, if you are missing even one of these, it might not be the pricing strategy for you. Each part is key in building out a converting freemium funnel.

dariusj18 6y ago

Who has to google "photoshop"? Also, Canva seems more like a "Publisher" killer. But Publisher was already dead.

Strom 6y ago
> Who has to google "photoshop"? A great question that I think must be considered. I use Photoshop all the time, but definitely don't google for it. Search trends are not a 1:1 match for usage. That said, the Google trends for basic terms like water and food are still on the rise, even though I think they suit the question Who has to google this? even better.

nbzso 6y ago

Yet another marketing article masquerading as an "expert opinion". The real reason Figma wins over Sketch, which is superior as a design tool, is not the freemium. Multiplatform availability and collaboration are the selling points. But if Figma wants to expand market share, soon or a later they must go native.

jamil7 6y ago
Interesting take. I haven't used either Sketch or Figma that extensively for quite a while, so take my opinion with a grain of salt. It was my feeling that Figma lacked some of the finess in terms of finer vector drawing and advanced features that Illustrator or Sketch provided but was "good enough" in 99% of use-cases that it didn't realistically matter to their target customers. There are some parallels to the Google Docs X Word relationship I think. Edit: I read your comment wrong and removed part of mine to make sense. We're basically in agreement.

evouga 6y ago

I’d never heard of Canva before and, taking a quick look, based on its feature set I don’t see it as a competitor to Photoshop or Illustrator really. Canva seems all about taking an existing template and swapping in some new photos and text. Of course, this is very useful and I’m sure there’s a huge market for such functionality when creating Instagram posts, etc. But it’s very different from full-featured image editing (photoshop) or authoring complex vector graphics (illustrator).

sheriffderek 6y ago

I'm going to create a "Free" service where you can just "freely" choose to stop creating these totally useless and backward pieces of production art. Then, you might see the unicorn out there in the mist... the UX person who can actually just "make the prototype" and the design system - instead of inspiring hundreds of useless meetings to deliberate over a flat perversion. I like paying for things. Good things. And when I pay for good things... (and they are managed well) - they inspire people to make more good things. This whole "Free" thing... is costing us all - big time.