Moving Customers From Freemium To Premium: The Art Of Monetizing Virtual Products

Author

Ava Seave, Contributor

January 21, 2015

“Busuu has more than 50 million registered users and a few million monthly actives,” said Bernhard Niesner,  CEO & Co-founder of busuu.com the online language learning platform.  He believes his company is the largest platform for language learning in the world – with its combination of free and paid active users.

Where do all of busuu’s users come from? English is the most popular language, with the emerging markets of  Brazil, Russia and China as the company’s biggest and fastest growing countries for English.  “At the moment, most of our growth actually comes from mobile downloads,” explained Niesner in a recent interview. “We see quite a substantial of people now directly downloading our mobile apps, as opposed to a few years ago, they were mainly on our web site.”

Niesner shared insights about nine important sources where busuu finds customers:

  • App store optomization. “App store optimization, where you can optimize the title of your app and the key words is incredibly important.”  Niesner  explains.  “It optimizes the visibility of the app. We are learning more and more and there are more and more analytics developed in the field.” Niesner is optimistic that effectiveness of both Google Play and Apple’s app store  will be expanding  very soon. “Analytics themselves for knowing about the search is still quite limited. There are some tools, but it is very early days.  But Apple announced that soon we will be able to measure how many people actually viewed your app page, how many converted to a free download, but it’s not yet live.  But it is something that is coming soon.”
  • App store as partner.  Niesner notes that the company is in close contact with Google and Apple  as crucial distribution partners. “From time to time they feature our app, especially if we have done major releases, major improvements or new features.  And then we get featured by Apple and Google and that massively drives user acquisition. On those days we might even get more than 100,000 downloads per day.”
  • Paid digital marketing. “We do a lot of paid marketing especially for global expansion. So Google  Ad Words allow you to acquire, for example Japanese users who want to learn Italian or Chinese users want to learn English. Once you figure out the lifetime value of these different kinds customers, you can determine the different bid prices you are prepared to pay for the different campaigns.”
  • The future: paid search in app stores? “I think soon there might be an opportunity to make paid search in the app stores. But at this moment we have spent very little money for millions of downloads that we have received.
  • Social network boost campaigns On Facebook or Twitter, busuu does “acquisition campaigns for mobile installs. You can do ‘boost campaigns’ in specific markets in order to get a lot of downloads to get up in the rankings.”
  •  WOM. “Obviously word of mouth is a classical one where ideally our customers are recommending our product to a lot of people. It has a high conversion rate later on to paid conversion as well.”
  • Display advertising/retargeting for existing customers “There is a place for a bit of display marketing and retargeting that is good for existing customers to convert them to premium membership for people who are already on our web site.”
  • Corporates and universities:  testing the waters. “It is nothing we do proactively. We just get inbound sales from corporates  and universities. We sold a few thousand licenses, but at the moment we focus on B-to-C, because what we learned with B-to-B it is a different animal: You need to train potential HR managers or tutors; the companies might want customization; and sales cycles are much longer in B-to-B.
  • No TV  advertising.  Unlike busuu’s competitor, Babbel, Niesner says the company cannot make TV promotion work. “In 2013, we were lucky enough to win five million Euros at a startup competition that was a 5 million ‘growth budget’ from a German TV channel. And it was a very interesting experiment for us.  We realized it was quite an expensive acquisition channel and is something that needs a lot of optimization. Maybe for the future, but for the time being, we don’t do TV.”

Freemium to premium is not easy

“It is still not easy to monetize with a virtual product such as language courses,” says Niesner. “But especially in emerging markets, where learning English isn’t a hobby, but they do it in order to improve themselves, to improve their professional situation, there is a real return on investment on language skills. There are certain studies, depending on the country where you really see people with language skills earn significantly more than without knowing English.”

About the actual price point, Niesner says, that  “although we do have regional price discrimination, to take into consideration purchasing power of a country,  we have found that a fair return on investment for many people seems to be $9 per month.” The longer term subscriptions are cheaper, with a 2-year course about $5.80 per month. “There will always be a free alternative,” he explains.  “It’s like transportation. You can go with your own car or you can walk.  But it depends on how quickly you want to get from A to B. And we really believe for the kind of outcome you have  with our product, it’s a very attractive bargain.”

When  busuu  started the business in 2008, although they were completely for free,  they paid close attention to what people were asking for in additional features to develop what they could charge for. “People were asking for grammar, asking video lessons, asking for recording exercises,” said Niesner.  “And we listened to our customers. And we developed those features, but then we put them into the premium part of the site.”

By continuing to be in close contact with our community, Niesner said “we make sure that it is not just any random thing, but that it is added value features where people can really improve their language skills.  And that helps of course to grow our revenues. We are still doing A/B testing to see what kind of features people really want – then we align this with our business model.”  This plays out by denying the free user  the complete experience, so he will never be able to “finish a full course”  which has been an effective  hook for getting interested and loyal users to convert to premium users.

This is the first article based on an interview with busuu’s CEO & Co-Founder, Bernhard Niesner. The second is Teaching Langauge Quicker, Smarter, Better:Innovation Through Adaptive Learning, Testing and will appear tomorrow.

This article was written by Ava Seave from Forbes and was legally licensed through the NewsCred publisher network.

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