Evernote pricing changes - Fun with numbers
Posted on June 28th, 2016
In case you haven't heard, Evernote is increasing the pricing on its paid tiers and limiting its free tier to only sync with 2 devices. How 'could' this affect their bottom line? Let's run some hypothetical numbers.
Basic - adds passcode, limits to 2 devices per account (web use doesn't count I don't think)
Plus - was $3 month, $25 year -> now $4 month, $35 year
Premium was $6 month, $45 year -> now $8 month, $70 year
Lets make some guesses on what this move might mean... rough estimates, and only yearly pricing numbers:
Lets assume 150 million users (old 2015 number)
Lets assume 5% paid conversion rate - 7.5 million paid users
Lets assume 80 / 20 mix of pro / premium = 6m pro / 1.5m premium
Previous Pricing Sales:
Pro, 6M @ $25.00 = $150M
Premium, 1.5M @ $45.00 = $67.5M
Total: $217.5M Annual Revenue
Possible results of pricing / feature change across tiers:
Free: Some will be mad at the device limit and leave (these are not paying so don't count), some will upgrade to pro
Pro: Some will downgrade to free
Premium: Some will downgrade to pro
It is to hard to figure out what percentage of free users will cross the new, more expensive, pay barrier so instead lets guess as a percentage of current pro users:
Lets assume they gain an optimistic 5% (of 6M) pro users converting from free due to the new device limits:
300K pro users convert for 6.3M total
Lets assume a worst case of 10% downgrades for each pay tier due to price increase:
600K pro users (10% of original 6M) leave for a new total of 5.7M pro (offset by new users)
150K premium users leave for pro: This gives pro 5.85M while premium now has 1.35M premium left.
So after the churn we end up with less pro and premium users:
Pro 6M -> 5.85M
Premium 1.5M -> 1.35M
But how does this affect the bottom line?
New Pricing Sales:
Pro, 5.85M @ $35.00 = $204.75M
Premium, 1.35M @ $70.00 = $94.5M
Total: $299.25 Annual Revenue
So besides getting a whole lot of bad will, Evernote gains around 81M in annual sales, or an increase of 37.6%. Is it worth it? Time will tell. Of course all these numbers are just wild guesses. As for me, I'm considering downgrading from Premium to Pro. Normally I would ride out a price increase from one of my favorite products, but a 55% increase with no immediate benefit? The only premium features I'm using that I'll miss are search in PDF and annotate PDF.