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Measuring Your Freemium Business. Ranjith Kumaran. What you’ll learn today: Your conversion rate is not too low. Your cancellation rate is not too high . But your cost-to-serve *is* too low. and how to tie it all together.
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Measuring Your Freemium Business Ranjith Kumaran
What you’ll learn today: Your conversion rate is not too low. Your cancellation rate is not too high. But your cost-to-serve *is* too low. and how to tie it all together.
Myth #1: Freemium businesses only work if conversion rates are between 5%-10%
Some real conversion metrics ~900K subscribers / 1000K active registered (2006) = $1B market cap ~200K subscribers / ~20000K registered (2009) = $0.5B market cap ~180K subscribers / ~5000K active registered (2010)(does not include corporate or pay-as-you-go customers, see math on slide after next)
How we measure conversion at YouSendIt individual subscribers + pay-as-you-go users + corporate deployments activity (login or file send)
Myth #2: A viable subscription service can only churn at < 2%
Real monthly cancellation rates Cell phone 1%-2% Netflix ~4% Virus scanning ~10% Dating sites ~15% SaaS solutions 1%-20%
Cost-to-serve dashboard hosting costs + operations headcount+ customer service headcount + depreciation + credit card / payment fees + …
The only number that matters? Lifetime value (> acquisition + service)