Freemium tanked my SaaS for 6 months — a cautionary tale
For the past six months, my SaaS product Reform has been dead stuck at a revenue plateau. The reason? We switched the business to a freemium model. Ten days ago, I silently killed the experiment, and now April is on track to be the best month of MRR growth ever.
Two weeks ago, I was on a long walk in the forest (my favorite place to think) and a random thought hit me — when did our current revenue plateau begin vs. when did we launch our free tier? I literally had to hold my phone high above my head to catch enough 3g juice to pull down our MRR chart from ChartMogul, but I had to know instantly. It turned out that there was basically a one-to-one correlation between where our plateau began and when we launched our free tier on Product Hunt (😱 on the chart above). We actually released the free tier all the way back in April, but over the summer we ran a big annual 50% off deal which caused the spike before the plateau.
As mentioned in a recent post, I recently went solo on Reform and the free plan was resulting in a lot of support and abuse that I now had to deal with all by myself. Especially the abuse was terrible and so incredibly demotivating. There’s nothing worse than waking up in the morning and seeing a fake login page form that someone has already started to use for phishing. So I was already looking for a good excuse to kill the free plan (as if the abuse wasn’t enough lol). Seeing that MRR chart annotated with the free plan launch dates provided that excuse.
So I killed it. I didn’t tell anyone, I just wanted to see what happened without polluting the samples too much. Originally, we offered a 7-day free trial before charging someone’s credit card. This time I decided not to offer the trial, and I also increased the price of our Pro tier from $25 to $35. It only took a couple of hours before the first Stripe “new customer” Slack notification came through. Muhahaha, I said to myself.
To make a long story short, in the first three weeks of April, we got five new customers. In the past ten days since getting rid of freemium, we got fourteen. That’s three times as many customers in half the time. In fact, right now, April is our biggest month of revenue growth ever. Uhm, yeah, so we’re putting the brakes on the freemium experiment for now.
What went wrong?
So honestly I don’t really know, but one thing is that I hoped our implementation of freemium would pay for itself via referrals (powered by Reform kinda thing) — instead, it just cannibalized our potential paid customers. Was this a bad assumption? Maybe, but the way we implemented it was basically the way Typeform did it ten years ago, and it worked like crazy for them. All free forms had a prominent “Create your own Reform” button and the confirmation page was an ad for Reform. But it drove barely any signups — like close to zero.
One theory for why this was working for Typeform ten years ago but didn’t work for us: Most people that fill out a Reform aren’t looking for a tool like Reform. There’s an indie competitor to Reform that has a lot of traction in the Notion and no-code communities. My theory is that if you fill out a form by a “no-code influencer” you’re literally being influenced by them and probably want to use the same form builder they are using. Same thing in 2014 when all the cool kids (👋 Pieter Levels) were using Typeform.
The reason, I think, that we are getting customers faster now compared to before having the free plan, is because of all the hard work we’ve put into acquisition since then with SEO, etc. Maybe all that stuff actually did work, but freemium was just throttling the effectiveness of it.
Instead of turning this into a “pros and cons of freemium” post, I think I’ll just end it here. I thought it was important to share a story of freemium not working and share my theory for why. Hopefully it helps you think through freemium for your own business — maybe it just confirms whatever bias you already have (but at least it was entertaining?).
Who knows! Freemium. There you have it!