1. Big Data Analytics For
Freemium Startups
Rags Srinivasan @rags
Pinching Pennies from Consumers:
Iterative Path
Charging For The Extras
Math Marketer Copyright © 2012 Rags Srinivasan

2. Freemium Businesses are Based on Hope
Free Marketing Users to WoM Marketing
Customers
Users sign-up Users fall in love Users tell their friends
because it is free and upgrade and followers
Math Marketer Copyright © 2012 Rags Srinivasan

3. Lack of Predictability Poses Business
Challenges
How many will How much to invest?
upgrade?
Effect of WoM What is the valuation?
marketing?
Math Marketer Copyright © 2012 Rags Srinivasan

4. Current Aggregate Data are Not Enough
When a user signs up what is the likelihood she will upgrade?
Fixed cost: $250,000/yr
Revenue per customer:
$0.25/yr
Total Users: 3MM
Total Customers: 100,000
Knowing 2-3% of your current user base are paying customers does not
help
Math Marketer Copyright © 2012 Rags Srinivasan

5. What if You Can Improve Your Knowledge
About Your User Base?
Know your Know if a change in Know if a user will
customer mix marketing mix will never upgrade
help
What is the information worth to you?
Math Marketer Copyright © 2012 Rags Srinivasan

6. Your Users are Creating Enough Data – Can
You Put that to Work?
Clickstream
Stimulus - What is the
Response
expected lifetime
value of this user?
Interactions Should you keep
her or show the
door?
Math Marketer Copyright © 2012 Rags Srinivasan

7. Probabilistic Marketing Can Help
Before your eyes glaze over –
let us start with a standard pack
of cards
Bayesian Statistics and
Logistic Regression
Math Marketer Copyright © 2012 Rags Srinivasan

8. Let us Start With Simple Probabilities of
Drawing a Card
I draw a card at random and ask you the probability it is a
Jack
Probability of drawing a Jack:
= 4/52 = 1/13
Math Marketer Copyright © 2012 Rags Srinivasan

9. Suppose You Can Ask Me A Few Indirect
Questions
Now we are in the realm of
conditional probabilities
introduced by Bayes
Math Marketer Copyright © 2012 Rags Srinivasan

10. You ask – Is it a red card?
If I answer yes If I answer no
Probability it is a Probability it is a
Jack is 2/26 =1/13 Jack is 2/26 =1/13
Not all questions are useful, but …
Math Marketer Copyright © 2012 Rags Srinivasan

11. You Ask – Is It a Picture Card?
If I answer yes If I answer no
Probability it is a Probability it is a
Jack is 4/12=1/3 Jack is 0
Some questions are immensely useful in
increasing your knowledge – from 1/13 to 1/3
Math Marketer Copyright © 2012 Rags Srinivasan

12. Your Users and Prospects Can Be Modeled
Just Like a Deck of Cards
Not quite But using Logistic Models
and Bayesian Regressions
Math Marketer Copyright © 2012 Rags Srinivasan

13. How Likely is that a Freeloader will Upgrade
within 1 Year?
What is the Information Worth to you?
Do-
Yes Apostles
Gooders
WoM Marketing
(See here for details)
Freeloader
Customers
No s
No Pays Premium Yes
Math Marketer Copyright © 2012 Rags Srinivasan

14. Ask me how
Math Marketer Copyright © 2012 Rags Srinivasan