Freemium

Freemium offers a genuinely usable free product to drive adoption, then converts a fraction of those users onto paid plans that add capacity, collaboration, advanced features, or support. The free tier functions as the primary acquisition channel.

It works when the marginal cost of a free user is low and the product proves its value before the paywall. It fails when the free tier is either too limited to attract users or too generous to convert them.

The free tier generates no direct revenue; it exists to acquire users at a cost far below paid channels. Revenue comes entirely from the minority who convert to paid plans. The whole model rests on the free tier costing little to serve while demonstrating enough value to justify upgrading.

• Free-to-paid conversion rate
• Cost to serve a free user
• Time to conversion — how long the free period runs
• Activation rate — free users reaching the core value moment
• Expansion revenue from converted accounts

A free tier cheap enough to serve that scale is not a liability. Conversion concentrated among users who hit a clear value moment. Converted accounts expanding over time rather than sitting at entry price. Organic signup growth outpacing any paid spend.

• Feature-limited — core free, advanced capabilities paid
• Capacity-limited — free up to a usage or storage ceiling
• Seat-limited — free for individuals, paid for teams
• Time-limited trial — full access for a fixed window

• What is the free-to-paid conversion rate, and how has it moved?
• What does it cost to serve a free user annually?
• What behaviour most reliably predicts conversion?
• How long does a typical user stay free before upgrading?
• What happens to growth if the free tier were tightened?