The shoebox of data is more valuable to the customer as it becomes larger. (He says he thinks the figure will top out at about 22 percent.)
But after about a year, 4 percent have converted. About 0.5 percent convert to paying customers in the first month. 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. Evernote charges them $5 a month or $45 a year for these and other benefits. 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. That’s not worrisome, because the revenue from Evernote’s 500,000 active users is growing faster than the growth in the customer base. Libin showed that the magic is not only that it takes just a small percentage of customers to turn red ink into black, but also that the longer they remain customers, the more profitable they become.Ībout 75 percent of the customers walk away within the first four months. How many times has a venture capitalist heard that? But Mr. “If we can get a small percentage of users to pay we start to make money.” In 18 months, 1.4 million people have tried the service. That’s important because the company, which does no advertising, needs to acquire customers as cheaply as possible. Libin, who has run and sold two other start-ups.Įvernote, of course, is free. “It is a universal memory drawer,” says Mr. The Evernote application on three cellphones in the company's offices in Mountain View, Calif. But that rarely covered expenses even before a glut of advertising space and a severe recession cut the revenue stream. And Sampa, a personal Web site creation service started by former Microsoft executives, folded.Īdvertising was always the easy answer for making free pay. Indeed, in just the last few weeks, eBay has been looking to shed Skype, the free Internet phone call service. (Analysts say Flickr and YouTube are not.) While free is an enticing proposition, it is very hard to make it work. Although thousands of businesses offer free services online two of the biggest are the Flickr photo service from Yahoo and YouTube from Google few can claim to be profitable. Sure, it attracts customers, but the challenge is to find someone to pay for it. Free has also become a mantra for business gurus who advocate giving Web start-ups a shot at fast growth by bringing the price of most of their wares to zero.īut as a revenue generator, free can come up short. Even an unsavvy consumer can see a benefit in snatching free products.
GIVING away a product has always been a great marketing concept.
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