Don’t think of non-paying users as a burden, but as an advertising expense.

Written on June 20, 2011

When you are trying to earn revenue from your freemium product, the non-paying users (often the majority) can frequently seem like an unnecessary expense – you end up paying more for hosting and support for the free users than the paying users, and that is a frustrating predicament to be in. To make the experience more bearable, thinking of those users as an advertising expense rather than a pointless burden will be very helpful.

After six months of constant maintenance and brain-freezing customer support, it becomes very easy to forget why you utilized the freemium model in your software or service in the first place – so what was that reason? Primarily, the idea is that by allowing a greater number of users to experience the basic functionality of your application it will increase their willingness to upgrade to a paid version, and will encourage users to share the product with people they know: the greater the number of users, the greater the volume of sales at the same conversion rate. While the notion of a ‘try before you buy’ experience is occasionally useful, most customers who are willing to pay will be willing to pay with or without the trial option. The greatest return on investment from the expense of free users comes in the form of ‘word of mouth’ advertising, if you have 100 users, ten of them might tell their friends about it. If you have 10,000 users however, one thousand of them will tell their friends about it – and the spread of information regarding the product increases exponentially. This essentially means that you will have hugely increased the amount of both free users and paying users, which means more revenue, greater profit, and a satisfied developer.

Sure, the constant expense of those free users might not seem worth the burden, but if you write off the time and money spent on them as an advertising expense, it suddenly becomes more worthwhile. It is almost guaranteed that a $1000 advertising campaign will result in substantially fewer additional paying users than spending $1000 on support for thousands of free users: in the end it is worth the expense, if you are willing to put in the work.

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  • Interesting read this morning, much appreciated for sharing your knowledge!