Joel Spolsky explains why Trello's freemium model works: get 100 million free users, convert 1% to pay $100 a year, and you have a $100M business. He contrasts this with his failed paid product Copilot and the dotcom era's "everything free" thinking.
Chapters
He wrote a blog post which you cannot find anymore. And it was called the End of Free. Yeah, I remember this. Yes, of course it was enormously influential because Everybody thought in 95, when the Internet came out, the whole model was like, everything is free. And eventually the VCs came and funded it. And then there was this huge, massive crash of 2000 and whatever. And then the.com winter and said, you know what? Nothing's going to be free anymore. And he's like, I would rather have a company with 400 customers that pay me $10 a month so that I can eat stuff than 400,000 customers don't pay me anything and I can't eat stuff. So that was very influential at the time. And we were like, yeah, we're always going to charge for all the things. So we had a failed product and it was called Copilot, and it was a remote tech support product. You're talking to your mom on the phone, your mom was like, can you help me with my computer things? Because you're a computer geek, right? Okay, go to copilot.com, i'll go to copilot.com now I take over your computer and I fix the things. That's what that product was. And we were very much of this end of free mentality. So we're like, and it's five bucks. That's a good price for helping somebody fix their computer. Tech support departments can pay for it, whatever. What we should have done is made it free and then figured out how to pay for it later, which would have been to go to professional tech support departments and sell them the advanced version that lets them run a team of 100 tech support people or a thousand tech support people and sell it to them for a million dollars, but get the marketing from the free product. So that was our mistake. And when we launched Trello, even before we launched it, we said, how are we going to charge for this? And I think in 2000, I would have made that mistake again. I would have been like, hey, it's software. It's like Microsoft Word, $20 or $20 a month or whatever. What we said is we want 100 million people to eventually use Trello, of whom the 1% that get the most value out of it pass $100 a year, and then it's $100 million business and it's worth a billion and we're done. And it also has to be viral in some way. So you invite people to boards and you collaborate on boards. And we put a lot of work into that part of it. And that was the 100 million. The flip side of that is 99% of the people are just gonna get it for free. But when you focus on the 1% that find that most useful, they will pay you, and they will pay for added features, and they will pay you anything you want, because they're making money off of it. And I was reminded of when I used to work in the Microsoft Excel team, went to visit Deutsche bank, and they said, we like to laugh because Excel enabled the whole derivatives business. And they sit there and make spreadsheets so that they can figure out models that allow them to make literally billions of dollars a day. And Excel was, like, lucky if it scraped up a billion a year. Those folks pay anything for Excel.
