How CANVA Makes Money???|Freemium Business Model?|

How CANVA Makes Money???|Freemium Business Model?|

Imagine if you can design a Professional advertisement banner or a brand Logo without knowing photoshop in under 20 minutes.

So If you Google these question

1. How to make a poster/logo/ads faster in under 20 minutes?

2. How to make resumes for freshers under 20 minutes?

Chances are that you will land on CANVA. The biggest future competitor of Adobe Photoshop and a big threat to designers.

I am personally using CANVA for the last 6 years now and wonder how these guys make money by giving me a free tool. I mean I paid for photoshop and still finding it hard to use.

After Brainstorming for few weeks I get to know about their amazing Freemium Business Model.

Freemium = Free + Premium
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What is the Freemium Business model?

The freemium business model allows users to utilize basic features of a software, game, or service for "Free", then charges for "upgrades" to the basic package.

This means they give the free version of their product to everyone who wanted to make a poster, logo, and resume on their own and then allow paid users to access their premium template, elements, and features.

Here is why CANVA Intentionally give their product for FREE

1. Word of mouth:-

Word of mouth is a marketing strategy by which your existing customer actively influence and encourage other people to use your product.

If you are making all your designs in CANVA and liked the Product then chances are that you will also advise your best friend to use this product.

So word of mouth actually reduces the marketing and sale expenditures of a company if you bring a huge customer base who love your product.

In conclusion, give a good product for free and you will find a huge chunk of people using your product because of word of mouth.

2. Network effect:-

To understand the network effect let me ask you a simple question

Why do you use Instagram?

Because all your friends, family members, and celebrities are there on Instagram. This means every additional member of the platform will increase the value for existing members

As a definition,

The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service.

(Read more about network effect here)

So CANVA gives them products for free so that more and more people can use their product and influence, other people, to also use the product.

3. Converting Free into Premium Customer

Imagine you are using Canva for making your resume.

While browsing through multiple templates you came across a business analyst resume template that exactly fits your requirement but it's a premium template.

If you have a full-time job then paying them $5/month is not gonna be a big deal. Hence you paid them because you need some premium resources like templates or icons.

CANVA does these feature micro testing using tools like Hotjar, Amplitude in order to find which features are attractive and which features are not attractive to customers.

4. Switching cost

There is a famous marketing strategy

"The Early Bird Catches the Worm"

If you want to disrupt an industry like Google and Facebook you have to make the market first and then allow more and more people to be a part of that ecosystem.

So catching them young even for free allows you to grab the market share and become the market leader. Later CANVA can monetize itself by adding specific features, premium assets/templates, add-ons, etc.

Not only CANVA !!!!!!!

There are other companies that also follows the same kind of Freemium business model

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Google Drive- First 15 GB Free followed by a $5 plan for 100GB

Linkedin- Premium Features like Sales navigator, Linkedin Learning, Analytics, and other insight

Airtable- First 1000 Entries free and then a $5 plan

Conclusion:-

CANVA sells their product for free to allow more and more people to use their product i.e Mass adoption. This will increase their user base and allow them to convert a small portion of Free customers into paid customers.

Pooja Udeshi

Market Research

3 年

Yes ! So true, Canva makes creating a post very easy and saves a lot of time. Their ready to use templates are just amazing.

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