A timely snapshot of a “freemium” business model
About 75 percent of the customers walk away within the first four months. That’s not worrisome, because the revenue from Evernote’s 500,000 active users is growing faster than the growth in the customer base. How? Customers discover that they need more than the basic storage space or want some extra features, like the ability to scan PDF documents for a particular word. Evernote charges them $5 a month or $45 a year for these and other benefits.
Mr. Libin studied the behavior of the earliest adopters and found that the longer customers used the service, the more likely they were to start paying for it. About 0.5 percent convert to paying customers in the first month. But after about a year, 4 percent have converted. (He says he thinks the figure will top out at about 22 percent.)