Freemium Conversion Calculator
Model freemium economics including conversion rate, the cost of serving free users, and whether the free tier pays for itself through converted revenue.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Freemium Conversion Calculator | — | Net contribution = (converted users × ARPA × margin) − (free users × cost to serve) | currency |
Step-by-Step Examples
42,000 free, 1,260 converted, ARPA 32, 82% margin, 0.18 cost per free user, 3,800 monthly signups.
- Conversion = 1,260 / 43,260 = 2.91%
- Paid contribution = 1,260 × 32 × 0.82 = 33,062
- Free tier cost = 42,000 × 0.18 = 7,560
- Net = 25,502 monthly
- Breakeven free user count = 183,682
80,000 free, 640 converted, ARPA 18, 70% margin, 0.35 cost per free user.
- Conversion = 0.79%
- Paid contribution = 640 × 18 × 0.70 = 8,064
- Free tier cost = 28,000
- Net = −19,936 — the free tier consumes more than it returns
150,000 free, 2,250 converted, ARPA 25, 88% margin, 0.02 cost per free user.
- Conversion = 1.48%
- Paid contribution = 49,500
- Free tier cost = 3,000
- Net = 46,500 — cheap serving cost makes a large free base viable
Real-World Applications
Common Mistakes to Avoid
If free users get everything they need, conversion collapses. The free tier should solve a real problem while leaving the expansion case obvious.
Support, infrastructure, and storage for a large free base add up. Where marginal cost per user is meaningful, freemium can consume more than it returns.
Freemium converts at 2 to 5% against trial rates many times higher, because free users have far lower purchase intent. The models are not comparable.