Ask HN: Freemium is doomed, why do many keep it anyway? | Hacker News Reader

Ask HN: Freemium is doomed, why do many keep it anyway?

14 pointscheerioty7 comments

It’s 2022 and many services still offer free accounts, despite the many negative effects they have. If you search HN or the web in general, you barely find success stories around having a freemium model. In fact, it really seems to hurt most products as it lowers the perceived value. And because of having an endless trial, users seem to try much less to explore and make things work for them.

Here’s just one recent article about a company that added a free account retrospectively and pretty much ruined their conversions/sales for a while: https://recurly.com/blog/hard-lessons-learned-in-the-land-of-the-freemium/

Full disclosure: My startup is offering a free account as well, and we’re actively considering to remove it.

View on HN

Most people won’t try a new product unless they can try it for free (especially in a B2C market). Freemium creates more signups, that’s a fact. The challenge, now, is to convert those free users into paying customers. But that’s much easier to do than converting someone who hasn’t interacted with your product at all.

Your freemium plan can be devastating to your competitors and discourages potential new market entrants.

It is also the fastest way to build an ecosystem around your company’s products.

In some cases, the person who introduces your product to an organization isn’t the one who will make the decision to pay for it. Freemium lowers the barrier to adoption for the former.

A lot of startups are more concerned around metrics that will help secure future funding than actually being profitable (no comment on whether this is wise or not). As such leadership is usually very unwilling to turn away any potential active users, even if that means some customers taking a free tier that would otherwise pay.

Successful fremium services of the top of my head:

- Cloudflare, Vercel, Fly.io, Heroku ...

- Youtube, Spotify ...

- Google Workspace

Probably depends on what "works" means. Signups can be important for putting on pitch decks for example. Plenty of companies do not have earning profit as one of their immediate objectives.

I find it unfair that paid accounts essentially pay for the freeloaders. This problem is mitigated by serving ADs to the free users or selling their data. That model is broken in many cases, so just don’t do it. Offer strictly paid from the outset.

This must be balanced against having to pay a premium for a service with too few customers to sufficiently spread their fixed costs.

Reply on news.ycombinator.com