What is freemium?

Freemium is a pricing model with a permanently free tier: the free product drives adoption and word of mouth, and a small fraction of users — typically low single digits — convert to paid plans when they hit limits on usage, features, or seats. It differs from a free trial, which is the full product on a timer.

The model succeeds when free users are cheap to serve and the upgrade wall sits exactly where serious usage begins; it fails when the free tier is either too generous to outgrow or too crippled to love. Competitively, a rival’s free-tier limits are among the most informative data points in a market — they encode exactly where that company believes value starts.