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The Physics of Freemium
Transcript of The Physics of Freemium
I'm from New York
Job: Growth Hacker
"Enlightened trial and error outperforms the planning of flawless execution" – David Kelly, founder of Ideo
I'm going to encourage you to look at freemium models "mechanically".
Why? Because that's how they make sense to me.
"User Momentum" -- a relative measure of a user's propensity to perform actions in the product -- (uM)
"Total Energy" -- a measure of the total energy in your system, as calculated by:
Avg. uM x #Active Users
"Resistance" -- the degree to which the product stands in the way of users performing actions.
A simple input-output system
Users go in, effects come out
of the Funnel
Other Good Effects
Must overcome paywall "Resistance"
Functionally constrained or
Created a "kind of" free use: search for dates
Would actually Increase uM
Easy to optimize
Easy to model and project
Dissipates a lot of Energy
Signups with lower uM never use the product
Exploit User Data in Marketing
The Big Idea:
Members in Westfalen, Germany
Find an alternative, optional, parallel use case that generates revenue.
Should not interfere with free use
Should not be compulsory
Should naturally attract some percentage of your total active users.
in early 2008
Crowded SaaS space
Modest WOM-driven growth
No idea what the value model was
LTV = unknown
So, how do you accelerate growth?
The Winning Strategy
Event software spectrum in 2008
hard to use
focused on registration
easy to use
still pretty Web-stupid
focus on email invites
free / ad-supported
free with no constraints
very easy to use
Pulled in users from a wide section of the spectrum: from birthday parties to big conferences.
When people sell tickets
Lots of events of all kinds
Lots of email invitations
Competitors weren't even trying to expose events as content.
Event listings SEO was owned by spammy aggregators, like zvents.com and eventful.com
What would happen if we (a primary publisher and a PR 7 site) made a point of getting all our events indexed?
got all events indexed
got listed for a long tail of city + event type combinations, like "Concerts in Canoga Park"
Opened event-seeker traffic floodgates
Wayback Machine: http://goo.gl/1lwHk
event seekers became organizers!
Almost entirely attendee-facing
Lets users of various uM levels use the product
High potential maximum E
lots of usage (of all types) to iterate the product against
Hard to model predictively
You need to have deep analytics in place to figure out what's going on
Hard to optimize for revenue
30-day free trial
seekers + organizers = "events marketplace"
The Bigger the Free Use
The Bigger the Revenue
presented by Jack Mardack
So, how are we hacking growth at Prezi?
So how do you make money?