Want a big community? Work out your freemium strategy — Podcast with Shaun Steingold of Momentum Labs

Thinking of doing a free trial for your app? You might want to put that idea on hold.

In this episode of the Sub Club podcast, Shaun Steingold, founder and managing director of Momentum Labs, a private equity firm for mobile apps, breaks down how and why the freemium model can trump the free trial.

Across the many apps and companies with whom he’s worked, he’s “never seen [a free trial] work.” The reason, Shaun explains, is because you’re creating a negative experience by giving users something, then taking it away from them. Ultimately, it might even hurt conversion rates.

The moments of pause, when the free trial ends, can take users out of the experience and put them off using the app further. As Superwall CEO Jake Mor shared with David recently, the number of people who tap the free trial button, but don’t actually start the trial is approximately 60%.

Why a freemium model might trump the free trial

A well-planned freemium model, which fully embraces the power of a large community — sometimes made up of 90% free users.

“I’d rather have a community of a million people than a community of 15,000, even if most of the people in that million cohort are free — because they are actually adding value [and] keeping everybody plugged in.”

Shaun Steingold

But there’s a careful balancing act with freemium models, the nuance of which Shaun has experienced with weight loss and wellness app Healthi, acquired by Momentum Labs. To build a community that is stable and consistent, you need to make enough of a product free to maintain engagement, while keeping some features premium only.

It’s important to remember that this is only possible due to the unparalleled scale and distribution of the app stores. Previously, this kind of scale could only be enjoyed by the privileged few corporations like Coca-Cola and Nike. “What took Coca-Cola 60 years and $20 billion to build, any app publisher gets it for free at day one,” Shaun says. This echoes what Eric Crowley said about the App Store being the biggest marketplace in human history. 

And Momentum Labs taps into this marketplace by buying what others have built — but not the very top. Instead of acquiring top-ranking apps and their immediate competitors, Momentum Labs looks further down the rankings: the third spot and lower. Instead of 10-15% revenue growth, Shaun says, there’s 200% growth. As an app moves up the ranking list, its growth doubles. This is power law logic — hard for humans to understand, but critical for gaining and maintaining an edge.

Shaun Steingold: don’t forget the human impact of your app

At the same time, you’re sure to miss something if you have a single-minded focus on conversion rates, LTV, and CAC. It’s easy to get caught up in numbers soup instead of what really matters: How your app fits into users’ lives and their emotional journeys.