Freemium Economics Calculator
Is your free tier sustainable? Calculate the 'Cost Burden' of free users and the conversion rate required to subsidize them.
User Base
Unit Economics
Monthly P&L Waterfall
Breakeven Warning
You need a conversion rate of 2.70% just to cover the hosting/support costs of the free users. Current: 3%.
Sustainability Check
Profitable Model
The Burden
Free users cost you $4,850/mo. This consumes 80.8% of your revenue.
The Target
You need a conversion rate of at least 2.70% to break even on operating costs.
Scale Risk
If you double your users but conversion drops, your losses will compound. Ensure cost-per-free-user scales down.
Execution Steps
Enter your total number of users.
Input the marginal cost to serve a free user (Hosting, Support, Email).
Set your Conversion Rate to paid.
The tool visualizes if your paid revenue covers the 'Free User Tax'.
Pro Strategy
- Keep the cost of free users as close to zero as possible (Self-serve only, no human support).
- If your Breakeven Conversion is >5%, Freemium might not be viable. Consider a Free Trial (time-limited) instead.
- Monitor 'Active' free users. Purge dormant accounts to save server costs.
Core Concepts
Cost Burden
The total expense of maintaining non-paying users. In Freemium, paid users effectively pay a 'tax' to support the free ecosystem.
Conversion Cliff
The minimum conversion rate needed to break even. Below this, every new user (statistically) loses you money.
Virality
Freemium only works if free users attract more users (lower CAC) or provide data value. If they are just passive costs, the model fails.
What is Freemium Economics Calculator?
This model performs a break-even analysis on a mixed user base. It treats 'Free Users' as a marketing expense that must be paid for by the 'Gross Profit' from Paid Users.
Best For
- • Deciding to launch a free tier.
- • Analyzing server cost spikes.
- • Setting conversion goals.
Limitations
- • Assumes constant ARPU.
- • Doesn't value data/network effects of free users.
Alternative Methods
LTV/CAC Calc
If you view Free Users as leads, calculate the CAC of a paid user including the cost of the free ones.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Evernote
Huge user base, high server costs, low conversion.
Restricted free plan to 2 devices.