I built a small web app based on the freemium model. Free accounts are free forever, paid accounts have 3 tiers: 5, 15 and 25 bucks a month. I'm the only person behind the app, 100% self funded.
The development itself took around 18 months, doing it little by little on a part-time basis, plus quite a few months of testing. So finally in August 2010 I stared placing some target ads and trying to drive some traffic to the site.
I've done google adwords, banner ads, paid blog articles, twitter, link building, postcards and one trade show. I've spent around $1,800 on marketing over 4 months.
After 4 months, I'm just barely breaking even with the costs of having the app live. Server, asset hosting, credit card gateway + merchant services, and other third party services such as video processing and encoding for example. I haven't made any of the money back I spent on advertising.
I have around 500 registered users, around 250 minimally active (verified their e-mail and logged back in after sign up), and 100 use the site on a regular basis. I"m embarrassed to say, but only 20 people actually pay for the app.
The paying costumers absolutely love the service. I get e-mails all the time saying they are so happy they found it. I also give very good and personable costumer support.
Now I don't know what to do anymore. I built, tested, advertised and supported the app. What's missing?
Is my app ever going to make money?
Do I just need to spend more money on ads? My conversion rate for free sign ups varies form 8-30% depending on the source, and paid sign ups 0.5-2%. Should I drop the free plan?
Is it time to abandon ship or put more money into it?