Business Bytes
Curt Finch

Success With Freemium and No Investors: Interview With MailChimp

 

In Part 1 of this interview series, MailChimp’s CEO Ben Chestnut discussed how going freemium led to creating a fund for integrators, resulting in creative new developments with their product.  Freemium may be a business model, but Ben views it more as a marketing model.  Find out why below.

Curt: What percentage of your development team’s hours is devoted to the user experience?

Ben: I would say about 90%.

Curt: So it’s all about user interface.

Ben: Yes, it’s all about the product.  My development team is really fascinated by UI (user interface).  They can launch a feature and see more than 800,000 users using it the next day.  It’s only recently that we have a team focused on just infrastructure.  The development team used to be about 80% UI and 20% infrastructure, but now there’s a dedicated team for infrastructure.

Curt: When somebody signs up for your free service, how do you determine if they will convert to being a paying customer?

Ben: It’s not something we look at that closely because of the way we approach freemium.  For 10 years, we worked hard to build a profitable company.  Consider this: if you go to the mall, you’ll see the Chinese restaurant in the food court giving out free chicken samples. They’re not tracking conversion rates. It’s just extra chicken they’re giving out to give you a taste.  Freemium is like free sesame chicken.

Curt: How do you manage company information?  Do you work in the cloud or on servers?

Ben: We use CloudFront.  We also use EC2 for some projects on the side and Akamai.  We also have servers managed by Rackspace and Voxel and Softlayer.  Our database and application servers sit across three different hosting companies. These hosting companies are all LAMP: Linux, Apache, MySQL, and PHP.

Curt: On your web site, you have a video that shows that your customers have doubled. Earlier you mentioned that you are up to 800,000 users.  This means you have close to a million accounts, right?

Ben: Yes, it’s now over 900,000.

Curt: How many of these are paying customers?

Ben: A good chunk.  I like to keep my competitors in the dark so I don’t ever talk about that but a good chunk of them.

Curt: Typically, freemium has a conversion rate in the one to ten percent range.  I’m guessing you’re doing better than that.  You don’t have to answer.

Ben: It may sound like we are not looking at the numbers and that’s not true.  Our focus is elsewhere, mainly on scaling the infrastructure.  Because of the way we approached freemium, we’ve been fortunate enough that we have not had to obsess over the ROI and see how many users are converting.

Coming up in the 3rd and final installment of this article series with MailChimp, CEO Ben Chestnut will discuss pricing models and the types of customers his company prefers.

Curt Finch is the CEO of Journyx, a time and resource management solution.

Curt Finch has more than two decades of software development and distributed workforce management experience. In 1997, Curt created the world's first internet-based timesheet application and the foundation for the current Journyx product offering. Curt has a B.S. in Computer Science from Virginia Tech. His book, All Your Money, is available on Amazon. @curtfinch