Let’s take a time machine back to 2011.
We land on a Friday.
You know what that means? Unfortunately someone is singing:
‘It’s Friday, Friday
Gotta get down on Friday’
It’s also the day of the week to pick up a movie from Blockbuster, then show my brother who’s boss with a game of Wii Tennis.
And if you were like me you spent a couple hours downloading free music with YouTube to mp3. (Don’t worry I didn’t download Friday)
Little did we know how quickly this would change…
Music was expensive (~$20 for every album) and the alternative was paying with your time to find music in less straightforward means.
It was a burning pain for a lot of people.
Then Spotify came along and let anyone signup for a generous free trial. All of a sudden everyone could play any song they liked within seconds.
So they give a huge amount of value upfront, and only after a few months do they start to restrict some features to paid accounts only.
Importantly, in the free trial you save songs, discover new ones, build habits and share it with friends.
Once the trial is up, a lot of friction stands in the way of moving to ‘Youtube2mp3’ or even another music streaming app.
For most it’s an easier decision to just pay the $10/month.
I know what you’re thinking… Cool, but a freemium strategy isn’t anything crazy special.
You’re right, but Spotify has achieved exceptionally high conversion rates.
Most freemium apps have a free-to-paid conversion rate of 1%. Even back in 2012 Spotify was converting 27%. Now it’s more like 43%.
Why does freemium work so well for Spotify?
They strike just the right balance between giving value upfront for free and withholding features to make the free plan feel a little restrictive.
Music was expensive (~$20 for every album) and the alternative was paying with your time to find music in less straightforward means.
It was a burning pain for a lot of people.
Then Spotify came along and let anyone signup for a generous free trial. All of a sudden everyone could play any song they liked within seconds.
So they give a huge amount of value upfront, and only after a few months do they start to restrict some features to paid accounts only.
Importantly, in the free trial you save songs, discover new ones, build habits and share it with friends.
Once the trial is up, a lot of friction stands in the way of moving to ‘Youtube2mp3’ or even another music streaming app.
For most it’s an easier decision to just pay the $10/month.
I know what you’re thinking… Cool, but a freemium strategy isn’t anything crazy special.
You’re right, but Spotify has achieved exceptionally high conversion rates.
Most freemium apps have a free-to-paid conversion rate of 1%. Even back in 2012 Spotify was converting 27%. Now it’s more like 43%.
Why does freemium work so well for Spotify?
They strike just the right balance between giving value upfront for free and withholding features to make the free plan feel a little restrictive.
Solve a burning pain for your users, and let them try your solution for free so you can gain their trust. It has to be genuinely valuable for free. But also restrict access to at least a few valuable use cases until they’ve paid.
You want your users to want to pay you.
The Spotify founders struck up expensive deals with music record labels knowing they would have to achieve never-before-seen conversion rates to make the company profitable.
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