Started as freemium product … reached 10,000+ users.. When is the best time to add a premium service?

We’re two new graduates, a year ago when we was still students we’ve started a freemium ad-free service (website + multiple apps), within one year we received nearly $100 as donations and we won 3 competitions with a total value of $4000 (3D printer + tablets + phones).

Now that we’ve got more skills and we reached more than 10.000+ users and our service costs us time and money, we decided to work on a new version of our service with a new fresh design and some very innovative and handy features. The problem is, since our users support us because we’ve decided to build a free & ad-free product, we’re afraid that they reject the idea of adding a premium service and don’t pay for it.

After some reflections we’ve decide to have two types of users “normal user” and “premium user“, the last one we’ll cost $4/ year and will have extra features.

My suggestion is, since our users support our free & ad-free product, instead of adding a classic pricing page (which we found all over the net and we all hate it!), we can just add something like “[…] Our user volume is growing each day […] Please donate to keep our service running free & ad-free and enjoy our complete service […]” (which is true by the way)

So my question is, since I’m not a marketer nor a business expert, what is the best way for us, adding a classic Buy button to pay $4 and get premium status with our extra features, or adding a prefilled field with $4 (AT LEAST $4) with a Donate button to get a Donator status (or OurAppNamer status) to get our extra features, or wait to reach millions of users before asking this? 🙂

  • You need to monetize now if your market is 70-99 percent bigger than what it currently is. You don’t have anything until you’ve made money. Most likely, 9k users will fall off once you begin charging, but 1k paying always beats free.

    I truly don’t understand why $4 a year is so scary for you to charge. If your product is worth more, charge more. If it’s worth less, enjoy running a charity.

    • Thank you for your response, We were aiming for more users first, but yes 4$ a year is not a big deal comparing to what our service offer.. Thank you 😉

  • Frankly, this looks hopeless. When evaluating any business plan you have calculate how much money you need in order for your product to be viable, then figure out the actions you need to take to get there.

    So let’s do the math: If 5% of 10.000 users pay $4, then that’s $2000 a year. Less 500 for transaction overhead. Then there’s other costs, such as servers, ads, miscellaneous. And the big one: the salaries for you and your cofounder.

    So your current plan is to make a new version of your service so that eventually you’ll maybe gross $1500 a year? This is a joke. You might as well go sell sand in the Sahara or refrigerators on the north pole.

    I understand you’re not a business expert (I made dumb mistakes too, believe me), but you’ve got to kill this strategy right now because you’re guaranteed to go broke this way. If you can charge your premium users $50 or $100 a year AND you can grow to 500.000 users in a year then maybe, just maybe, your business plan can be salvaged.

    If you’re building something people aren’t willing to pay money for you’re not delivering enough value. It’s as simple as that. It is possible to create a free consumer product, but then you need to raise lots of money. Which you won’t if you’re this naive.

    I know it’s hard to look at your situation objectively when dealing with a labor of love. In this case even with a very optimistic back-of-the-napkin projection you’re not making any money. So you’ve got to snap back to reality.

  • My startup is based on a freemium app. In less than one year, we have 100.000+ users. Premium users pay more than $100 per year. Very few people pay, but it is growing. Mostly because we make some repeat business and convince more and more people to pay. But new users coming is a nearly flat curve.

    My numbers are way above yours, and we can just pay tiny salaries to founders. No more, no less. You may think I’m a happy startup CEO ? Not that much. We all work harder than hard every day to earn just enough to survive. And we are not sure to grow enough to live well. Our finance is perfectly safe: at ultra low wages, this is a perfectly viable zombie startup which can kill us during years. So we must grow our figures ASAP.

    Your figures are so low you can’t go anywhere. You must have short term plans to earn at least $10K each month. Below this bar, you don’t have a real business. Only a costly hobby. It’s OK at the beginning, because it’s a startup, but you must have revenue ASAP. Otherwise it will be a costly hobby.

    When asking for payment ? As soon as possible. I sold subscriptions until day one, and I had my first paying customers on day one. It was just a few bucks, but everybody knows it is not free. You don’t imagine how difficult it is to convince people to pay for something they had for free until then.

    Make a true reality check. And think about your business model. You don’t need a business plan, but you must have a decent business model.

    Last but not least: forget the “donate” button. Been there, done that… I worked quite hard during years with friends on a very serious free software. It was a success. One day we put a donate button. We received quite nothing. Not enough to go together to a restaurant… When people see a donate button, they think “Good idea, I will think about it”. And they never donate, because they feel free to use it for free. After all, you made it free, so you agree not to be paid. Don’t make that mistake.

    Good luck and kind wishes !

  • Surprised to see negative comments here about asking you to be profitable right away! They surely are MBA grads who never did their own product.

    Here are few things to consider:

    1] 10K users is not a lot but its very good. Talk a lot with these users. Meet personally , call them, buy them coffee whatever. Listen to their problems and figure out what few features you could build next to solve the most imp ones. Now keep currently product free and offer the remaining for a charge. Yes Freemium. People wont mind paying if you solve an imp problem. My tyres are flat you can fix it, cool. I will pay you.

    2] Focus more on growth. See why people are signing up, who are these people and double down on growth. In the initial days grow and add value to your users.

    3] Focus on engagement: 10K users , are they using actively, what can you do to increase their engagement. This will help you grow easier and get you close to product market fit.

    Lastly just AB test some pricing strategies and see which one you will get more money.

    • Thank you for this great comment, yes we’ll try to be closer to our users and communicate with them.. we’ve already a lot of beta testers ready to test our next version and give us their feedback. We’ll try to focus on bringing more users and increase their engagement with our service then we’ll see how to choose the best pricing strategy.. Thanks 😉

  • Have you asked your existing customers whether they’d be interested in a paid version of the product? And what makes the paid version better?

    Freemium in practice tends to be making the free product crappier and crappier over time – just enough that people don’t quit using it – but at least theoretically this doesn’t have to be the case.

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