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.

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.

Same here. I don't think I would of started my Hacker Newsletter if Mailchimp didn't have their free account, but will be happy to pay as it continues to grow.

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.

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.

True. But getting to the first 85K users is quite an accomplishment too.

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.

Have you done a lot of price point testing also? I see that you have a free choice, so you must have some unique perspective on this article.

we've changed prices four times over the years...your learn something new all the time, and we are constantly testing new things. Though...i'll tell you something...we tend to test a million different pricing page designs, and rarely change our whole pricing model. that said, the real lift comes from changing your model - not your design...and I guess this article proves that out as well.

So have you seen the same amount of success with your freemiums as mailchimp?

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.

What happens when you acquire your 4th client?

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.

have you ever told anyone about FreshBooks?

Yes, I got a bunch of people who send me invoices to do it through Freshbooks. But AFAIK, we're all using the free account ...

I would love to see some more insight into this subject from what you guys at FreshBooks have learned about it.

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

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 :)

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 $$$.

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

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.

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.

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!

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

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.

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

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.

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?

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).

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

Congratulations on your success and hardwork.

Impressive.