Introduction
PostHog's free tier is one of its signature choices. Every product has a monthly free allowance with no credit card required: 1 million product analytics events, 5,000 session recordings, 1 million feature flag requests, 1,500 survey responses and 100,000 exceptions, among others. Above that, customers pay per unit with prices that fall as volume grows. Most companies that use PostHog never pay, and that is by design: the free tier is the top of PostHog's funnel, its marketing budget and a big part of its developer brand. The question is whether shrinking the 1 million event allowance would improve monetisation enough to be worth it, or whether the free tier should stay generous.
I'll clarify the context, classify the trade-off, understand the product, form a hypothesis, choose metrics, design an experiment, plan analysis, and then use a decision framework to recommend.
Step 1
Clarifying Questions (3 minutes)
- Why it matters: A cash-flow concern and a long-term pricing review lead to different answers.
- Hypothetical answer: Infrastructure costs of serving free users have risen, and investors are asking about conversion rates.
- Impact: We need to weigh the cost of free users against their future revenue.
- Why it matters: Shows how important the free funnel is.
- Hypothetical answer: Over 80% of paying customers started free; the median time to first payment is about 7 months.
- Impact: Any change will show up in revenue with a long delay.
- Why it matters: These are the users a change would hit first.
- Hypothetical answer: About 12% of active free orgs use 500,000–1,000,000 events a month.
- Impact: Lowering the limit to 500,000 would push these teams to pay or leave.
- Why it matters: Cost reduction may solve the problem without changing pricing.
- Hypothetical answer: Yes, through sampling, shorter retention for free plans and storage optimisation.
- Impact: Adds a third option to compare.
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