How to Generate $100 Million in Annual Recurring Revenue by Giving Away Something for Free

(with Johnny Hanna)

How to Generate $100 Million in Annual Recurring Revenue by Giving Away Something for Free

“Startups don’t fail because they lack a product; they fail because they lack customers and a profitable business model.”

-Steve Blank, Entrepreneur

A profitable monetization model is a key aspect of every business. In today’s show, Johnny Hanna discusses some monetization models, and other strategies, that have attracted customers to his companies and helped him generate strong profits.

Johnny Hanna is the CEO and co-founder of Homie, a company that is revolutionizing the home buying experience. Homie’s mission is to simplify home buying and selling with a one-stop-shop experience. Prior to Homie, he was the president and co-founder of Entrata, a real estate software company. Johnny helped Entrata grow to more than $100 million in annual revenue. 

The Freemium Model

While Johnny ran Entrata, he and his coworkers recognized that if customers were using their platform, they could influence them to buy their other services such as their websites, online payment system, or revenue management system. So, they gave away their accounting software for free and then sold all of the other tools and services connected to that system. 

This was a way to get their foot in the door using the highly-successful freemium model, providing one product or service for free, and then charging for something else. This freemium model is one of the most tried, tested, and proven successful digital monetization strategies. The freemium model has been the most successful monetization model in my career.  With this freemium model, Entrata has been able to reach more than $100 million in recurring annual revenue.

“The freemium model allows users to experience and get hooked to products by removing initial barriers to adoption. As users realize incremental value over time, they are willing to pay for premium features and capabilities.” (Source:

Loss Leader

Similar to a freemium model, we can also use a loss leader strategy to attract new customers. A loss leader is when a company provides a huge discount on a product or service to get clients in the door. Homie does this by providing a highly-discounted flat fee for selling a home. This attracts many clients to them because they don’t have to pay Homie a commission based on how much the house sells for. After the client becomes thrilled with their experience with Homie, they often buy the company’s other products or services, which is where Homie generates its profits.

“When customers buy other items in addition to the loss leader, you make a larger profit based on the volume of purchases from customers. By choosing your loss leaders and complementary products, you can actually use loss leaders to encourage purchases of other items in your store.” (Source:

Homeownership as a Service

Homie is rolling out a new model similar to the software as a service model. This “homeownership as a service” model is a new concept that would give Homie a recurring revenue stream. Johnny and Homie realized that with this model, they could take a lot of the headache, risk, and work off their customer’s plate. So, they brainstormed homeownership services that the company could provide as a recurring service. They came up with services such as replacing air filters, trimming trees, mowing lawns, chlorinating the pool, spraying for bugs, or adding salt pellets for a water softener. The customer would pay a monthly fee and choose which services they would like, and the company would automatically send qualified people to perform these tasks. Just like Homie, we can create recurring revenue streams in nearly any niche.

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Using the “Kind-of-like” Comparison to Establish Credibility

Describing a new product, service, or business can sometimes be hard and requires a long, detailed explanation, but it doesn’t have to. During our conversation, Johnny described Volley, an app that he is excited for and planning to use in his business. Johnny said it is “kind of like Marco Polo for business.” This “kind-of-like…” description strategy is a powerful way to quickly describe a new product or service in a way that adds credibility. I already knew what Marco Polo was, and that it is very successful, so it was immediately easy for me to picture what this new app does. He used the kind-of-like strategy to compare something new to something I already trusted, and as a result, the credibility and understanding flowed through to the new thing he was trying to describe. This is a very effective strategy. 

I have been told that when movie scriptwriters are pitching movies they often use a similar strategy, describing their movie as kind-of-like an existing movie, but with a specific difference. For example, the plot of Finding Nemo is kind-of-like Taken with an overprotective single father who gets into dangerous situations while searching for his abducted child, however finding Nemo is animated with fish. This kind-of-like description gets to the heart of what we are trying to describe in a simple way. It easily allows our customers to understand what our product or service is about without a lengthy description. Try it. What well-known and credible product or service is kind of like your product or service?

How Volley Leverages the Tectonic Shift of Video

Volley is an app that allows businesses to communicate with their customers through video. It is perfect for a business like Johnny’s. Their realtors can record videos ahead of time to automatically send to new clients. These videos can introduce the agent and company, and then walk the new client through their process. The client can watch it any time and rewind it if they miss anything. Face-to-face interaction is the best way to interact with our customers and clients, but when that isn’t possible, video is the next best thing. Volley is a great example of leveraging a tectonic shift to create a successful business.

Consider Hiring a Firm to Help Create Advertisements

One way Johnny has effectively utilized video is by hiring firms to create marketing videos for them. They hired people who had previously worked for the Harmon Brothers (a previous guest on the show, and the creators of advertising campaigns for Poo-Pourri, Purple Mattress, and more). As a result of this strategy, Johnny’s videos have had several million views. 

Nearly half of businesses (41%) reported spending at least a half-million dollars on digital marketing each year, and 81% spend at least $50,000 (Arora Project). Every business is going to have to advertise in some way. Experienced advertising firms can be a great way to ensure our advertising budgets are being put to good use.

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Seek Testimonial Videos from Customers

Homie has also utilized video through testimonial videos from their customers. Many of Homie’s clients are hesitant to share they used Homie on Facebook or social media because they have close realtor friends, and they don’t want to hurt their feelings. They especially don’t want to hurt their feelings by going with Homie and then brag about how wonderful their experience with Homie was on Facebook. One way that Homie has been able to work around this is with testimonial videos from their clients. Many of their clients were willing to do testimonial videos and let Homie promote them, instead of the client making the videos and promoting the videos on their social channels that the realtors are following.

According to a 2014 Demand Gen Report, 97% of B2B buyers feel that user-generated content like consumer reviews is more credible than other types of content, and a 2014 study found customers spend 31% more with businesses who have good client testimonials (Source: Spectoos).

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Homie’s Video Campaign with Their Realtors

Homie is also doing testimonial videos with their own realtors. In response to some campaigns against them, saying that they aren’t realtors or that they aren’t professional, Homie has launched a video campaign with their realtors, saying “I’m a realtor, and I recommend that you go with Homie.” With these videos, they will be able to show potential clients that they are credible in a format that simulates a face-to-face interaction.

Connect with Johnny

If you enjoyed this interview and want to learn more about Johnny or connect with him, you can find him on LinkedIn at or check out

Key Takeaways

Thank you so much Johnny for sharing your stories and knowledge with us today. Here are some of my key takeaways from this episode to help us improve our monetization models:

1. If you have not already, consider implementing a freemium model or a loss leader strategy to attract new customers, to whom you can then sell additional products and services.

2. Try to find the recurring revenue streams we can provide in our niches.

3. When we are describing our products and services, try to find something well-known and credible to compare them to with a kind-of-like strategy.

4. Think of how we can implement video into our business to more effectively engage with our customers and clients when in-person interaction isn’t an option.

5. If we want to increase the effectiveness of our advertising, we might consider hiring a video advertising agency to help us create the best video ads possible.

6. We absolutely need to seek testimonial videos from customers to promote our businesses. 

7. We can also use testimonial videos from our own employees to show our business’ credibility, especially to others who belong to their tribe, just like Johnny had his realtors share testimonials with other realtors.

Want to be a Better Digital Monetizer?

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    About the author

    Nathan Gwilliam

    Nathan Gwilliam

    I help organizations navigate tectonic shifts that are transforming the business landscape, so they can optimize marketing, accelerate profits, and make a greater difference for good.

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