AI Monetization and Freemium Models in the SaaS Industry

Good morning SaaSers,

Want to make some extra cash? Why not tell everyone that your writing is AI-generated? You might see a massive increase in your net worth, just like Buzzfeed's stock did - it jumped by 150%! Just a thought.

• 🤖 ChatGPT launches pro subscription plan + discover who else is monetizing AI.

• 🚨 SMBs are under attack and losing billions every year to malicious hackers.

• 🤑 Find out why a freemium model may be the right choice for your business.

• 💸 +18 funding rounds including Portside ($50m), Craft ($32m), Sentra ($30m).

OpenAI Introduces ChatGPT Plus

• OpenAI has launched a pilot subscription plan for ChatGPT, starting at $20 per month.

• ChatGPT Plus offers benefits over the free tier, including priority access, faster response times, and access to new features and improvements.

• ChatGPT Plus is only available to customers in the U.S. and plans to expand to additional countries soon.

This led me to ponder: which other companies are monetizing AI technology?

Fortunately, Crunchbase recently published an article showcasing various AI applications and the companies behind them. Here are a few:

Video

• WSC Sports generates personalized sports videos for every digital platform and every sports fan - automatically and in real time.

• Papercup translates videos using AI by generating voices that sound like the original speaker.

• Rephrase.ai builds generative AI tools to create professional videos with the ease of writing text.

Music

• SOUNDRAW is an AI royalty-free music generator for video creators.

• Boomy is a generative music company building AI-powered tools that creators use to make original songs.

• Beatoven.ai is an AI-powered music generation tool for video and podcast content creators.

Writing

• Grammarly is an AI-powered writing assistant that helps users to communicate more clearly and effectively.

• Jasper is an AI content platform that allows individuals and teams to use AI to scale their content strategies.

• Deepgram is an AI Speech Platform that provides developers with a simple-to-use Speech-to-Text API.

Customer Service

• Forethought is a generative AI platform for customer support automation.

• Retail Rocket is a software platform developing AI-enabled marketing automation tools.

• Ask-AI mines text-heavy corporate knowledge and customer communications for precise answers and actionable insights.

Protect Your Company from AaaS (Attack-as-a-Service)

• Small and medium-sized businesses (SMBs) are becoming increasingly vulnerable to cyber attacks, accounting for 43-61% of all security breaches and $7 billion in losses.

• Guardz, a cybersecurity startup, has emerged from stealth mode with $10 million in funding to offer a two-part solution to protect SMBs against cyber attacks: security tools and cyber insurance.

• The company targets organizations with 10 to 250 employees and has plans starting at $9/user/month.

• Guardz launched with 300 customers from its closed beta and is one of several companies offering similar services, including ActZero, Cowbell, Stoik, At-Bay, and Coalition.

• Read more about it here.

The Advantages of Implementing a Freemium Model

SaaS companies often face difficulty deciding when and if they should adopt a freemium model for their business. Recently, TechCrunch published an informative article on the topic. Here is a summary:

There are three common business models:

1. Freemium: reaches a broad audience and retains them even if they don't have the budget for the solution.

2. Free trial: showcases the product's full value with a time limit and requires a decision at the end of the trial.

3. Sales-Led: inquiries are managed by a sales representative to facilitate conversion through interactions with the prospect.

Companies choose to introduce freemium plans for the following reasons:

1. Retaining acquired audience: keeps prospects engaged and increases their likelihood of buying the product.

2. Expanding product-market fit: makes your product accessible to new customer segments and use cases.

3. Improving market share: helps you remain competitive by offering a free basic use case.

When is freemium not ideal?

1. If you target high-end markets: these customers will pay a lot of money but also require a lot of resources to serve (e.g., security, performance, and more features).

2. If you only want to boost metrics: assess whether the prospects obtained through freemium are valuable (i.e., will they ever pay?).

3. If your product relies on paid acquisition: a freemium model attracts a broader audience by default, which can lead to a higher proportion of users who do not convert to the paid version. This creates a challenge in devising different campaign strategies for high-intent users who know what they want and low-intent prospects still in the research phase.

Here are two approaches to launching a freemium product:

1. Offer a basic use case with unlimited usage and charge a fee for additional features. This approach provides exposure but may take longer to monetize users.

2. Offer a basic use case with limited usage and charge a fee for exceeding the limit. This approach monetizes faster but may attract fewer users if alternatives are less restrictive. Finding the right balance requires testing.

• Portside | $50m Series B: aircraft data, reporting, and analytics platform for individual and corporate plane owners. (link)

• Craft | $32m Series B: proprietary data platform enables supply chain and procurement professionals to discover, evaluate, and monitor suppliers. (link)

• Sentra | $30m Series A: automatic data discovery, classification, monitoring, and protection for cloud-first organizations. (link)

• Recurrency | $22m: ERP automation platform built for growing distributors. (link)

• Ziflow | $20m Series A: creative collaboration and online proofing platform for agencies and brands. (link)

• Nobl9 | $15.8m: service level objective (SLO) platform for site reliability engineers (SRE). (link)

• RocketRez | $15m Series B: all-in-one cloud ticketing for tours and attractions. (link)

• PortPro | $12m Series A: Transportation Management Software built to improve operations, save time, and (link)

• Profit.co | $11m: OKR software integrated with task management, performance management, and employee engagement. (link)

• Lavender | $11m Series A: AI-powered sales email coaching platform. (link)

• Nexus | $10m: platform powering Support-a-Creator programs for live service video games. (link)

• Guardz | $10m: all-in-one cybersecurity solution for SMBs. (link)

• Fibery | $5.2m Series A: work and knowledge hub for startups. (link)

• Dalia | $5m Series A: recruitment marketing automation platform that converts lost job seeker traffic into qualified applicants and lowers job advertising spend. (link)

• Cleary | $4.5m Seed: employee experience platform for high-performing teams. (link)

• Sales River | $3.95m Series A: all-in-one sales platform for distributed teams. (link)

• EasyTranslate | $3.2m: translation management software providing AI-generated content, customized workflows, and automated processes. (link)

• Yobi | $2.75m Seed: AI-focused customer communications app for small businesses. (link)

👋 That is all for this week -- thank you for reading!

Keep an eye out for next week’s update for more software news and insights.

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