Freemium Summit East: When Free Isn't Enough — Transitioning from Free to Freemium in the Consumer Space

A panel at Freemium Summit East in New York Monday, “When Free Isn’t Enough — Transitioning from Free to Freemium in the Consumer Space,” featured Ning vice president of business operations Anne Driscoll, SlideShare co-founder and chief technology officer Jonathan Boutelle, and HootSuite founder and CEO Ryan Holmes discussing their companies’ experiences in transitioning users from free services to paid models.

Driscoll started out by discussing the basic premise of Ning: Every group, business, and organization needs a Web site. Social has gone mainstream. Every Web site will be social. She added that Ning brings to the table creative freedom and control; seamless local integration; a robust, scalable open platform; turnkey monetization solutions; data and insights; and privacy control.

In detailing why Ning decided to transition from freemium to a paid model, Driscoll said that in April, Ning contained 325,000 networks, but the 15 percent that were paying some sort of premium represented 80 percent of its traffic. So the company reset its goal to build the very best product for its customers and align its resources to support profitability.

She went into detail on dealing with advertising, saying that it turned Ning into an über-publisher and adding, “When you run advertising, you have to do a variety of different things. You have to make sure your platform and everyone on your platform is safe. If abuse happens, you don’t get paid.”

Ning’s schedule: On April 15, it announced the end of free networks. On May 4, Ning announced new plans, as well as sponsorship plans for its educational users. On June 16, the company detailed its new revenue channels. On June 24, it revealed its partnership with Pearson, and ditto for WEGO July 19. Finally, on. July 20, it launched its Mini, Plus, and Pro plans.

Driscoll’s four takeaway points: It’s OK to ask for money if you offer a great service. You will never make everyone happy. You need huge volume or differentiated audiences to make ads work. Free didn’t enhance our product positioning

Next up was Boutelle, who stressed, “Don’t charge for things that bring you more users,” adding that relying only on SlideShare’s 4 percent conversion rate would mean that “We’d be cutting off 96 percent of our bulk uploads.”

Boutelle added that SlideShare entered a model of lead capturing, or enabling users to generate leads from their slides, with his SlideShare charging by the field, and on a per-lead basis, calling it, “Thinking like Google — aligning our interest with the interest of the buyer.”

Boutlelle also said SlideShare ran into problems with a la carte offerings and prepayment. On the a la carte front, he said, “Paying by the drink is stressful. People were much more comfortable with a fixed, outlined cost.” And on prepayment, he added, “Prepay makes price experiments difficult. Having credits in your system that people have bought but not used yet is actually a drag on your product development. We’re committed to that pricing model until they spend those credits.”

He continued, “Bundles increase perceived value. Test subscription plans the easy way: What goes in what level? Turn every feature on for everyone while in testing phase Setting your prices too low can be lethal. But how do you know that your prices are too low or too high? The best way to test is to have coupons. Change that coupon and see how it affects the conversion rate.”

Mentioning that SlideShare generated the bulk of its conversions to paid customers within one week of those users signing up for its free service, he said, “First impressions matter. No one signed up immediately, but after about one week, conversions increased dramatically. The initial first user experience is critical to whether people will eventually convert to the paid offering.”

Boutlelle also spoke at length about interacting with SlideShare’s customers and users, saying, “Customers who are paying you money feel that they have the right to pick up the phone and call you – to complain, to suggest new features. This is really cool. Customers want to find out who is looking at their slides. We implemented those features and built an analytics offering into our data. Free users keep you honest. But paid users also keep you honest. Paid users are also expecting your free offerings to be kickass. Flattery will get you places. Make your paid users feel like they’re in the business-class section of the plane, and everyone else is in coach.”

Finally, on which statistics companies aiming to convert users from free to paid should focus, he said, “Conversion volume, not conversion rate. Free users generate revenue. Churn kills revenue. Churn is cancer. Churn is the only bad thing that can happen to a subscription business. The stats that matter are churn, conversion funnel stats (how people come in from free to paid), and raw conversions.”

Holmes concluded the panel by discussing HootSuite, the social-media dashboard that launched in December 2008, saying that its migration strategy focused on surveying customers, analyzing metrics, researching customers’ previous migrations, determining pricing options, and “cohort” rollouts.

In his words (or the words on his slides): User communication is critical; not necessarily easy (always be haterz); slow and steady FTW; keep expectations in check.

As for HootSuite’s cohort trials, Holmes said its second iteration was far more successful than its first. The first attempt included multiple buckets of features and predetermined limits on team members, but HootSuite fared far better with a la carte offerings, experiencing a doubling of conversions and better numbers despite the lower price point, “We want to get people in at a lower price point, and then find ways to monetize them,” he added. Switching to the second iteration brought an 80 percent increase in Pro signups and a 15 percent increase in free accounts.

HootSuite also took down the pay walls on its mobile offerings — covering all platforms — with an eye toward mobile usage driving customers to the paid Web offerings.

His lessons: communicate early and often; use good analytics tools; include all payment options (“We did not include AmEx in our initial release”), test before diving in; gradual rollout.