- February 2, 2023
- Posted by: Waldon Fenster
- Category: Uncategorized
Business owners and entrepreneurs around the world have just been given a powerful glimpse into the future of digital marketing thanks to ChatGPT Plus. This innovative new software is revolutionary in its ability to take advantage of three key strategies – freemium, product-led growth, and community-led growth – all rolled into one package.
At an eye-popping cost of $20 a month, it’s worth taking a deeper look into how this robust platform can help grow your business’s bottom line with some creative arithmetic.
To start, let’s make some assumptions about ChatGPT Plus’ current customer base: with 100 million active users currently enrolled in their free version, we estimate a 1-5% conversion rate from free to paid users. Do the math, and that’s 10 million premium subscribers paying $20 each for a total monthly recurring revenue (MRR) of $200 million.
When we factor in estimated annual churn rates between 3-8%, our projected annual recurring revenue (ARR) comes out to around $220 million – not bad for just one year!
ChatGPT Plus is here – and it’s only $20 per month!
Have you ever wondered how much revenue a business like ChatGPT could generate? It might seem impossible to guess, but with a few simple calculations, you can get a good estimate of just how much potential cash this cutting-edge technology company could be making.
Let’s break down the five steps we used to calculate their potential annual recurring revenue (ARR).
Step One: Number of Free Users
We started by estimating the number of free users that ChatGPT had in January 2023 – about 100 million! With such an impressive base of potential customers, there was no doubt that ChatGPT had a strong foundation for generating a significant income.
Step Two: Freemium to Premium Conversion Rate
To figure out how many of these 100 million people would sign up for the premium version of ChatGPT, we looked at benchmarks from other services like Spotify, Evernote and Dropbox. We found out that the average conversion rate for freemium services ranges anywhere from 1–5%, so we assumed that ChatGPT’s conversion rate would be somewhere in this range.
Step Three: Monthly Recurring Revenue (MRR)
Using our conversion rate, we estimated that if one million people signed up for the premium version, they would generate 20 million dollars in monthly recurring revenue. This means that if all 100 million people signed up for the service they could generate 200 million dollars every month!
Step Four: Potential Annual Recurring Revenue (ARR)
To figure out their potential annual recurring revenue, we multiplied their MRR by twelve months to arrive at an ARR of 240 million dollars for the first year alone. That’s quite impressive!
Step Five: Churn Rate
Of course, not everyone is going to stay subscribed indefinitely. We looked at different SAAS companies and found that their average churn rate is between 3–8%. We decided to err on the side of caution and use 8% as our churn rate which brought our total ARR down to 220 million dollars annually.
Considering the track record of success that ChatGPT has already established since launching in 2015, there’s no telling how high their profits may soar over the years ahead. Business owners around the globe should keep an eye on this company as they continue making waves with their unique approach to digital marketing; this could be just the beginning of what’s sure to be a bright future!
It’s amazing what combination of product-led growth, community-led growth and freemium models can do when given enough time and effort! For example, it took ChatGPT 7 years before they made it big with their Plus service – but those seven years paid off handsomely!