It’s pretty clear that this strategy is not working. Evernote has faced this problem as it matured - it has to continue to develop software for people who will never pay for it.Įvernote has tried to sell the idea that it can provide for the productivity software needs of a company, but in an better designed format. It’s a Catch-22: Keep spending money on users who will never pay for a subscription or have no base from which to convert users to subscriptions. Worse yet, those free users cost money in infrastructure and will leave if the product doesn’t continue to evolve. Unless enough power users adopt the software as a work platform, most of the company’s users will be paying nothing. Only power users need the extra features such as additional storage or administrative functions. The core issue is that the free version features are typically the most important features. If the upgraded versions don't offer enough additional value, then not enough free users will convert to subscriptions and the company doesn’t make enough money. If the free version doesn't offer enough value, the company can’t attract enough of a user base. The free version has to be ultimately useful enough to attract and hold users, while paid subscriptions have to offer enough additional value to persuade users to actually upgrade to a subscription.

The freemium business model's problem is that it requires a high enough conversion rate to justify the costs of the free users who stay free.

Evernote subscription levels