Freemium Conversion Rate

What is Freemium Conversion Rate?

Freemium conversion rate measures what percentage of free users upgrade to paid plans. It's the critical metric for freemium business models, determining whether free users are a growth engine or just a cost center.

Industry benchmarks vary widely: 2-5% is typical, though some products achieve 10%+ with strong value gates.

Why Freemium Conversion Matters

Free users cost money (support, infrastructure) without generating revenue. Conversion rate determines whether that investment pays off. Low conversion with high free user volume might still work; low conversion with few users is a failing model.

Conversion rate also reveals product-market fit. High conversion means free users find enough value to pay for more.

Improving Freemium Conversion

Design clear value gates between free and paid. Time-limit premium features in trials. Use in-app prompts at high-value moments. Identify PQL signals and trigger sales outreach. A/B test pricing and packaging.

Freemium funnel analysis:

• Free signups (monthly): 5,000
• Converted to paid (monthly): 150

Conversion Rate = 150 ÷ 5,000 = 3%

If average paid plan is $50/month:

Revenue from conversions: 150 × $50 = $7,500 MRR

Effective CAC: (Marketing Spend) ÷ 150 paid customers