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Ask HN: % of Free to Paid?

85 points by ahoyhere ↗ HN
Who wants to "open the kimono" a little on their SaaS experience? :) For the good of all, naturally.

I'm looking for info on people's experiences of free:paid account ratios. Not just traffic:signup of paid accounts rates, but over time (after signups).

Give to get: Freckle (http://letsfreckle.com) has a fairly typical conversion rate for signup - between 1 and 4%, on any given day, heavily dependent on the source/type of traffic. Overall, 7.8% of all our accounts are paid accounts.

I'd also love any posts, essays, etc., that you know that discuss this rate. I haven't had much luck googling.

EDIT: Made my intro more compelling ;)

40 comments

[ 2.8 ms ] story [ 89.2 ms ] thread
ahoyhere
Reasons I want to know this information (and maybe you do too):

* to know where I stand

* to help me decide if I should put more emphasis on the signup/upgrade process, or not

* to encourage other people to talk about this stuff (since it's so hard to find), to demystify it as a business

cullenking
My guess is offering a more comprehensive free account will get you more signups, which could increase the amount that convert to paying, however personally I am extremely unlikely to throw down money without getting a good taste of what I am buying.

You say you have very basic free accounts: do those free accounts tease the users into becoming a paid account holder? Meaning, I signup and use your service and notice 'oh wow, they offer ___', only to click the button and be upsold? I think the tease/upsell could be extremely effective, if your service presents itself as excellent and comprehensive.

On the other hand, just because you increase revenue doesn't mean you are more profitable. How much extra time do you allot to supporting free accounts? Will they be more of a drag than it's worth?

ohashi
Where you stand is kind of irrelevant without a complete picture (such as margins, traffic sources, customer acquisition costs, etc)

You should always be trying to increase conversions and trying/testing new ways of making that happen.

cperciva
Aside from a few testing and promotional accounts, 100% of Tarsnap users are paying.

I've never really understood the desire to attract non-paying customers, personally...

ahoyhere
Looks like your product is very resource-intensive. I can understand why you wouldn't.

I could be entirely wrong - but it seems like the freemium model works pretty well for SaaS when the resources per account are negligible, even if some free->paid conversions take months to mature.

jacquesm
That depends mostly on what you get out of a user. I get plenty out of non-paying users, in fact they give me content so the more the merrier.

There's more than one way to skin a cat.

cullenking
Since our service largely about sharing what our tool helps a user create, free users plaster links around the internet. They don't use much resources except bug reports and suggestions (I've let 300 accumulate over the last month), but they provide us with a big insight into what we need to do in order to be top notch. Additionally, since we are all about helping people map/find bike rides, free users increase the amount of rides in our database, which give value to the paying users.

I agree though, I want to keep their features very limited in order to push people towards paid accounts. It's hard to offer a recreational site (mapping bike rides), which doesn't propose to save people money (it's not a business site), without giving them a free trial.

fjabre
It's the economic exchange we make for not having a big advertising budget. Free customers are the marketing department in the freemium scenario.
manmanic
7.8% is incredible. Based on my experience, I think 1-2% is benchmark.

But really it depends on how widely your service is known, and to what extent it appeals to the mass market. Make either of those variables higher, and you'll get a ton more free users, and quite a few more paying users, but your %age will be worse.

Bottom line: looking at your traffic, I'd focus on getting yourself better known and getting more users, rather than converting the people already coming to your site.

Loic
I took the time to visit the website and he says, 7.8% is the ratio paid/free of the current accounts they have, but there is a but, they are not offering a free lifetime account. So, this is why the ratio is high as the people who just wanted to try will get their account removed after 30 days.

In fact, this ratio may only increase with the time for such offers as the number of paid customers will increase over time but the number of new signups may start to plateau.

patio11
I can give a couple of answers here, so I will. All numbers are expressed as "percent of free trial accounts which turn into sales", and ignore sales of my desktop software to folks who never sign up for the online version. (That makes up about 25% of my sales these days, declining fairly rapidly as customers get more used to web apps and I keep exiling the downloads further and further into Siberia because their conversion rates suck.)

BCC converts 2.1% of trial accounts into sales, which in my business model are one-offs.

That is the consolidated conversion rate and I rag on that metric regularly, because it mixes high-volume low-conversion user acquisition strategies with low-volume high-conversion strategies.

I just got done with (finally) building first touch conversion tracking yesterday.

Consider a user who Googles for [cub scout bingo cards], clicks the organic result, signs up for my free trial, comes back a day later via [bingo card creator] and clicks the AdWords ad, then converts. Google Analytics and the vast majority of tracking systems would score this as a win for AdWords. I'd like to be able to track it back to the win for organic SEO. So I built a way to do that. But I don't have good data on that yet, aside from one conversion which was literally the above example.

However, I have other ways of torturing the data to get at its secrets. For example, my Halloween promotions (high volume, reaches way outside of my core customer segments) converted at a rate of 1.3%, just among web app users (which works out to several thousand in sales... and it would have been better without that pesky "Ah whoopsie the signup button vanished in IE" bug).

On the other hand, organic searchers coming for e.g. Spring bingo cards who sign up for the trial convert at 3.4%. Sadly for me, they number less than a tenth of the Halloween deluge.

Looking at uber-niche organic search folks as a group, my conversion rate is better than 5%.

P.S. The "canonical" post on this subject, and the source of a lot of myths we have to kill in our industry, is the "SXSW Web App autopsy" from a few years back, featuring our friends at Wufoo among others. Google it, you'll find it easily.

ahoyhere
Thanks! Love the detail. I'll respond in time... our backend system doesn't (yet) help track where customers come from, when they upgrade from Free to Paid, and actually, not even how many upgrade as opposed to signing up as paid initially. Which I know is dumb. :)

In terms of where traffic comes from, though, we also see a huge difference. Search traffic has the second highest signup conversion rate of nearly 4.5%. We rank very well for several keywords, and quite a few people seem to search for us by name, too. Indicating more WoM.

The traffic source with highest conversion rate (5.8%) is one very targeted micro-banner on a specific blog I bought with BuySellAds, but it's not free and it's not as much traffic as search :)

By the way… I think I maybe was unclear. My 7.8% is talking about the percentage of the body of accounts. E.g., of all the accounts we have right now, how many are paying?

EDIT: Clarity.

patio11
Your definitions and my definitions are the same, I think.

Both turn out to be P / (F + P), for P = "accounts currently paying" and F = "accounts currently free".

P.S. You use Rails, right? If you're interested I'll blog on the code for this -- it is under 25 lines for the stupidest thing that will possibly work.

ahoyhere
Yep, we do. I always welcome more blog posts :D For me, I don't have time to do the design/marketing/'vision thing'/cust service AND code, so I'm leaving the code to my partners. I suspect he already has a plan but it hasn't been implemented yet.

Maybe I can hit him over the head with free code ;)

TomK32
My photostre.am doesn't charge customers yet, but of the 160 users it currently has, some 55% already pay for a Pro Account at Flickr. Not bad, eh?

Signup conversions are equally good but that's because they mostly come via the Flickr App Garden.

shandsaker
We recently asked the same question of a number of startups as we wanted to write an article on it, but struggled to get enough to share. I can tell you one big name SAAS product (one you would all know) admitted they converted 2% of traffic into paid accounts. For the record they had a 30 day free trial as their freemium offer.

If you want our data, check out our post we wrote recently here:

http://www.eventarc.com/posts/2010/05/18/conversion-statisti...

jacquesm
Depends on the market.

my figures: 1:10 visitor -> user, 1:2000 user to paying members retention on average 6 months.

benatkin
You don't offer any free accounts, besides the free 30-day trial. Right?

In the absence of any long-term free accounts, doesn't your low percent of paid accounts to free accounts mean that you're seeing rapidly increasing growth? Or are you including expired accounts?

It would seem that roughly between 6.8% and 3.8% of your accounts are "stored" from more than a month ago, and between 1% and 4% of your accounts are from new signups. Splitting the difference, I get 2.5% from new accounts and 4.3% from old accounts. Now, that sounds like pretty fast growth, or high turnover. I'm curious how many people allow the first payment to go through, but wind up giving up on accurately tracking time (it's often hard to start work habits) and quitting.

I've had a job at a SaaS company, that had a 30-day trial, and no free option. I remember a larger % of paid accounts to total active accounts. I'm pretty sure it was over 20%. Growth was a bit slow, though. The cancellation mechanism was also different. The trial signup didn't require a credit card (bad idea, since one feature allowed customers to send custom emails), so people didn't have to do anything to cancel within a month. People did have to talk to customer service to cancel once they started paying, though. I think, especially with the email at the end of the trial, before they get charge, that your cancellation mechanism is much more ethical, because you let people quit painlessly (except for the pain of giving up on tracking time). :)

ahoyhere
We have free accounts, Ben!

They are severely limited, though, and I'm trying to decide what to do with them -- improve them, or not. I don't think they give a real idea of what Freckle is like because they are so limited. But I'm toying with the idea of getting rid of them altogether, now.

So, I don't believe our turnover is very high and the numbers are trending quite rapidly upwards.

But the whole "we do have free accounts" thing definitely makes your math incorrect :)

petercooper
Can't remember signup percentage, but on Feed Digest 2005-2006ish, about 5% of free users became paid users. At the time I understood this was "pretty good", though not stellar.
bjplink
I have a small golf handicap tracker (http://www.forescoregolfstats.com) with a limited free account and then a one-time paid upgrade that lifts those limitations.

As of right now, my free signups are converting to paid at 11.65% and that's about 1% below the average over the last year or so.

Caveat: My sample size here is very small. I've don't next to zero advertising for this site. Still, with the number of free alternatives that have sprung up since I built this thing, I think that percentage is pretty good.

tyrelb
I think an extension of this is: how do we convert free to paid...?

My thoughts were for my own SaaS application was to: - offer free account to "get a listing" - upgrading to a paid account gives ridiculous service/benefit - a commission is paid to the person two converts that free to paid member

I haven't launched yet, but looking at a 33% conversion ratio of free to paid.

But this seems pretty basic and lame. Anyone else have suggestions?

cullenking
Right now we do not have paid accounts, but are accepting user donations. I am counting donors as people that will signup for a paid account which is obviously a big under-estimation of what I believe our true percent of paid accounts will be.

Out of 11143 total accounts, I have 179 donors in PayPal, which is 1.6% 'paying' users.

We also receives checks in the mail from bike groups occasionally (random $100-200 checks in the mail are nice!) so I would guess that brings us to around 200-220 donors total, or just under 2%.

DenisM
What is your impression of the mountain bike community in general? do they like spending money?

I'm thinking about writing an iPhone app for WA state mountain bikers with trail info, but there is only so many of them (e.g. 2300 registered here http://evergreenmtb.org/) and I wonder how many would actually pay for apps.

cullenking
Well, think of it this way: how many of the 10,000 or so active mountain bikers in washington have an iphone, and how many that do bother taking it with them on a trail? My guess is many mountain bikers that would spend money on the sport already know the trails they like to ride, or participate in online communities to find new ones. Not sure how much market there is for an iphone app to do it.

Our service doesn't have much for mountain bikers (yet), so I don't have any numbers to share. This week I am building out better tracking/identification of riders, so should be able to get better insight into how different types of riders interact/value our service.

matt1
I made a similar post recently asking for feedback on my app's conversion funnel (http://news.ycombinator.com/item?id=1354179). My preliminary results showed a 1.6% conversion rate, which from what I gather, is fairly normal. I think with some better A/B testing, I should be able to improve that number.
spencerfry
I'll add something to consider:

Look at your % paid not only compared to total users.

Compare it to:

1. Last 30 days active.

2. Last 90 days active.

3. Last 180 days active.

Since free users dip off more typically than paid users comparing total paid to total users doesn't really make sense. It's better to look at it in terms of active.

cullenking
Great idea, I've done it here for our service:

  1) 200 / 4189 = 4.8%
  2) 200 / 6922 = 2.9%
  3) 200 / 8974 = 2.2%
And since we are starting to grow decently, I did users more active than 2 weeks ago: 200 / 2671 = 7.5%
3pt14159
The highest I've seen was 20%, the lowest I've seen was about 0.01%. Partially depends on your market, partially depends on your traffic volume (so you can iterate on tests) and focus. Really you should be asking about the whole funnel and looking at NPV vs CPA or ROI or payback period, depending on your financial and funding picture. I consult on this type of stuff for a living while I'm bootstrapping my startup. I'd try sell to you but I already have one of your competitors as a client so I don't think that would be a good idea. :)
eekfuh
I don't have a SAAS solution, but I do have a mobile application, which has a 10% paid accounts upgrade. I have about 60K on the free version and 6k on the paid version.
Loic
My product is project management and code hosting a kind of GoogleCode for your projects with private/public projects. You can get a 10MB storage (good also for private projects) for free and 1GB and up for money. Here are my latest stats (a mix of Google Analytics and my own tracking) for the last month:

- Conversion rate to free or trial offer: 3.56% (GA)

- Conversion rate for visitor having seen the plans page: 11% (Own tracking)

- Ratio paid/free offer counting all the forges: 2%

- Ratio paid/free offer counting only active forges: ~15% (it is hard to define sharply an (in)active forge)

The conversion rate for the hosting in my case is not that good because the product is also available as GPL software. You get both GPL+SaaS and the GPL conversion rate is 30% for the non bouncing visits.

You will soon get all the sales figures etc. directly on the website here: http://www.indefero.net Your question is just 5 days too early as I started yesterday to write all the details down. I will update my comment later not to force you to visit my site.

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callmeed
[drops kimono ... lights candle]

At NextProof (nextproof.com), we have 4 paid plans and a free plan. Right now, our ratio is 61% free plans and 39% paid plans.

The ratio was much higher until I changed the layout of our pricing page (http://www.nextproof.com/pricing/). I used to give the free plan details equal weight ... once we buried it, our ratio moved quite a bit in our favor (our overall conversions dropped a bit, of course).

As for traffic, our rate of conversions/total visitors is 2%. I suspect this isn't a good number, however, because the site includes our help pages. We convert 4% of organic google searches. We also convert about 1.5% of clicks on the small footer of each client's site.

It's also worth noting that we do a lot of cross-promotion with our main product and we offer a discount code to clients who use both. That might be why our ratio is not standard.

One more thing–our "free" plans have no monthly fee, but we still take a % of any transactions they make (we are a 3rd party payment aggregator). So, we still make some money from them.

Hope that's somewhat helpful ... I can answer more questions if you'd like.

paraschopra
I had to look at that page for 5 minutes before I could locate your free plan. Why don't you try removing it altogether? May be an A/B test?
jasonkester
I just ran the numbers for S3stat, and it looks like we get almost exactly 25% of our Free Trial users converting to paid at the end of their 30 days.

We don't have any form of free plan other than that 30 day trial, so that might explain why the conversion rate is a bit better than other posters here. People know before they sign up that it's going to cost them money if they decide to stick around.

lleger
We actually haven't seen any conversions yet on http://twoschedule.com. It's only been online for a month or so, but we have a fair amount of users and I expected to see more than that. I imagine it's because people are looking for more of an incentive to upgrade.