If it's a B2C model, then ad-supported might be the way to go, but if it's B2B, there are lots and lots of great examples of making things work. You definitely need to figure out the math about the incremental cost of additional free users vs. the margin generated by those that pay. But assuming the math holds, the product-led model works wonders.
From Zoom to Calendly, from HubSpot to Monday.com, the free tier generates an enormous user base that leads not only to upgrades, but also to a fantastic feedback loop that makes the product stronger and stronger.
In the space where we operate - the democratization of design - the most successful example is by far Canva. It has over 99% of users that are on the free plan, but with 60m users, that 1% is golden, and generates $1b in ARR. Melanie Perkins recently shared some of those numbers and their journey here: https://medium.com/canva/a-note-to-the-canva-community-1d4b0...
So, in the end, it's all about making sure that small % of customers that ARE willing to pay, pay you enough to make it all work. It sounds obvious, but it takes a lot of time to figure it out (we certainly do not have all the answers yet, even after 7 years). But here's the key: among the large amount of free users lies the very audience you need to listen to in order to determine what people are willing to pay for. That discovery process ends up being the game changer.
From Zoom to Calendly, from HubSpot to Monday.com, the free tier generates an enormous user base that leads not only to upgrades, but also to a fantastic feedback loop that makes the product stronger and stronger.
In the space where we operate - the democratization of design - the most successful example is by far Canva. It has over 99% of users that are on the free plan, but with 60m users, that 1% is golden, and generates $1b in ARR. Melanie Perkins recently shared some of those numbers and their journey here: https://medium.com/canva/a-note-to-the-canva-community-1d4b0...
So, in the end, it's all about making sure that small % of customers that ARE willing to pay, pay you enough to make it all work. It sounds obvious, but it takes a lot of time to figure it out (we certainly do not have all the answers yet, even after 7 years). But here's the key: among the large amount of free users lies the very audience you need to listen to in order to determine what people are willing to pay for. That discovery process ends up being the game changer.