How Canva’s strategy is challenging the tech giants

Recently I came across my younger brother’s school homework who is studying in the same school where I studied. He was asked to make a presentation. That reminded me of my school days as we also used to get similar homework where we had to make presentations, and the recommended platform used to be Microsoft PowerPoint. However, this time something was unusual. Along with Microsoft PowerPoint, he was also recommended to use Canva. 

This made me realize how Canva, a graphic design platform, has become a strong and significant alternative to big players like Microsoft and Adobe. Whether you have to design a presentation for your office, a poster for your college, a certificate for your event, a banner for an advertisement, a yearbook for your school, or a social media post, Canva covers it all and much more.

A teenage vision

At the age of 19, a communications and commerce degree student at the University of Western Australia, Melanie Perkins was teaching fellow students basic computer design to earn a little income on the side.

However, she founded the entire process of creating the simplest of the designs to be very complex as it involved using a plethora of different software and making designing a lengthy and difficult process. Those softwares were not only hard to learn but were even harder to use. It took students sometimes entire semesters to learn just the basics. Perkins realized this as a problem that needs to be solved. 

The idea of making design really simple was the first idea.

Melanie Perkins

That’s when Melanie Perkins along with her co-founder Cliff Obrecht started Fusion Books, a startup to design yearbooks which found a market immediately and became the largest yearbook publisher in Australia expanding to France and New Zealand. That’s when Melanie decided to scale up the business by expanding its scope beyond yearbooks.

So, she reached Silicon Valley and launched Canva in the year 2013 backed by $3 million funding. Later former Google executive Cameron Adams joined Melanie and Cliff as a co-founder. 

Today, Canva has over 30 million monthly active users across 190 countries who have made over 3 billion designs and counting. With a $6 billion valuation, Canva is now one of the world’s top so-called “unicorn” companies – private tech companies with a market value of $1 billion or more. 

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What is The Freemium Strategy and how Canva excelled it?

So, what is Canva’s strategy to become a design product which is challenging big tech giants?

Canva uses a freemium strategy, which is a combination of free and premium features. A Freemium strategy allows users to use some of the features free of cost and provides richer features for a subscription fee. A freemium model has a huge market appeal because it allows people to solve some of their problems or ease their tasks at no cost using free features initially.

This helps spread ‘word of mouth’ about the product in the market, attracting more users making the free features a robust marketing tool. This strategy allows new enterprises to expand the business and build a strong user base without spending much on marketing or sales.

The next step in the freemium strategy is to convert free users into paying premium users. This is done by repeated analysis of what is working and what is not. Let’s assume that a product has 10 features, and we have chosen 5 features which are free to use and 5 features for which users have to pay to use. To determine if this is a good strategy or not, we have to check two things – how much traffic our product is attracting and how many free users upgrade to premium users.

If the product is not attracting enough traffic, that means the current free offerings are not compelling, and hence either we have to offer better features or make some premium features as free features. The other case is that if the product is attracting good enough traffic but the conversion rate, that is, the rate of free users converting into premium users, is less, then that infers that our present free offerings are too rich because of which users don’t require to upgrade and hence we should make some free features as premium. 

A continuous analysis helps to drive more traffic to the product and also improves conversion rate. Another analysis can be performed to check which features are most popular. If free, those features can be made premium; however, this is a risky thing as users might not like paying for features that they were accustomed to getting free. It is found that the freemium strategy is a better and more sustainable source of revenue as compared to the traditional advertising model where a third party is allowed to display advertisements to the product users.

Canva and freemium

Canva uses the freemium strategy by providing 3 types of plans – free, pro and enterprise.

Free as the name suggests costs nothing to the users, pro provides some additional features for professionals at a price, and enterprise plans consist of more advanced features for enterprises as a whole at a price. The free plan helps Canva gain two types of users, one who become premium users and one who are free users but helps to bring new users by spreading a word who may convert into premium users.

Canva has even moved a step further in this part of free features where it removed the barrier of ‘sign-in’ on the product. Anyone can go and make a design on the product without signing in. This helps in more customer acquisition as a small percentage of users often roll back at signing in. 

Because of its rich features and easy to make design functionalities, anyone with little or no knowledge of design can create designs in a short period of time. This helps Canva to convert a significant amount of free users into pro and enterprise users.

To augment this, Canva provides a 30 day free trial period to pro and enterprise plans, making it more successful as users start finding more value in paying some amount than losing access to rich features. Along with this, it doesn’t hide the premium features; instead, they show them free features to the users to make them realize what they are missing. This lures more free users to upgrade to premium users.

However, the freemium strategy is not as easy as it seems which is evident from many failure stories where many startups tried and failed to make it work for them. But Canva has made a significant mark in making the freemium strategy work for them.

In a nutshell

In a nutshell, Canva realized the design market’s void with big players offering software that demanded time, money, and skill to do something productive. Canva then turned it into a business opportunity by empowering users with the power of design using a freemium strategy. As a result, today, Canva is one of the highest valued women-founded and -led startups, from California to China.

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