Free Tools Before Monetization

Neil Patel describes a business opportunity in the software market by creating products that are primarily free with minimal premium features, using Photopea (a Photoshop alternative) as an example case study.

Core Strategy

• Make 99% of features free to build massive user base
• Charge for only 1% of premium features
• Focus on undercutting established players like Canva, Hubspot
• Prioritize user growth over immediate revenue

Example Case Study (Photopea)

• Current metrics:
  • 10M unique visitors monthly
  • Potential to grow to 40M uniques
• Growth tactics:
  • Improve SEO
  • Increase virality
  • Add better templates
  • Implement AI features
  • Add social media filters

Revenue Model

• Target conversion: 0.5% of total users
• Pricing: $3/month average (varied by region)
• Example math:
  • 40M users → 200,000 paying customers
  • $3/month × 10 month average retention
  • ~$6M monthly revenue
  • $1-1.5M monthly operating costs
  • Potential $4-5M monthly EBITDA

Investment Required

• Initial acquisition: $20M
• Additional development: $10M
• Total investment: $30M