How Tolan 3X'd Subscriber Conversion after Shifting to Freemium

“We weren’t giving the user a real reason to upgrade.” That’s how Ajay Mehta, cofounder and president of Tolan, describes the first version of the free tier for his company’s AI companion app. Freemium opened up the top of the funnel, but it resulted in an initial short-term hit to subscriber conversion and ARPU, which was particularly problematic given that every session a user spends with their Tolan results in non-trivial AI costs. So Ajay’s team spent a year running hundreds of A/B tests that boosted subscriber conversion +200% and ARPU +218%, ultimately paving the way to Tolan’s recent announcement that it had raised $30M in additional funding from Union Square Ventures and Khosla Ventures. In this episode, Ajay returns to Subversive as the podcast’s first repeat guest to discuss: Why Tolan shifted its focus from Gen Z women to Millennial moms How it decided which features to give away vs. put behind the paywall Using cheaper open source models to make its free tier sustainable The specific A/B tests that helped Tolan maximize subscriber conversion How a single paywall test directly drove a 40%+ lift in ARPU Why the company expanded from one subscription tier to three How Tolan layered in in-app purchases and ads for additional monetization Tolan's vision for competing vs. Instinct, Muse, and Grok Bot in Personal AI Ajay Mehta: Website: https://www.tolans.com/ LinkedIn:   / ajayumehta   X: https://x.com/ajaymehta Phil Carter: Website: https://elementalgrowth.com/ Substack: https://philgcarter.substack.com LinkedIn:   / philgcarter   X: https://x.com/philgcarter Episode Highlights: [00:00] Introduction [02:43] Tolan’s latest $30M fundraising announcement [03:42] Tolan's transition from hard paywall to freemium [11:54] Shifting from Gen Z women to Millennial moms [16:45] Why Tolan expanded to three subscription tiers [22:17] Incorporating in-app purchases and advertisements [29:12] A/B tests that helped Tolan boost conversion and ARPU [32:45] Maximizing conversion through paywall personalization [37:23] Using contextual paywalls to further boost conversion [40:50] How AI is changing subscription monetization strategies [44:50] Why getting usage limits right is so critical for AI apps [47:50] How Tolan will maintain its edge in personal AI [52:43] Lightning round