Freemium Done Right: How Coddy's Energy System Balances Growth and Revenue

Freemium is one of the hardest monetization models to get right. Lock too much behind a paywall and you kill growth. Give away too much for free and you can't monetize.

It's a tightrope walk that countless B2C apps struggle with. On one side sits your retention team, desperate to keep users engaged. On the other sits your monetization team, trying to convert those users into revenue. Often, they're pulling in opposite directions.

Coddy, a gamified code-learning platform that reached $1M ARR in one year, took an unconventional approach inspired by mobile games. On a recent episode of the Levels Podcast, co-founder and CMO Barak Glanz shared how they built their "energy system"—a freemium model where usage limits drive conversions while keeping the platform accessible to millions of free users.

The Energy System: Borrowed from Mobile Games

Rather than building a traditional freemium model with feature tiers, Coddy adopted a mechanic familiar to anyone who's played mobile games: the energy system.

"In Coddy our mission is to turn code learning into a daily hobby. That's first of all. And Coddy is completely free for everyone all over the world. But there is a limitation over the daily usage."

Here's how it works: every user gets five energy per day. Energy recharges over time—roughly one unit every five hours. When you run out of energy, you can't use the platform until it recharges, unless you subscribe.

For free users, this translates to about 15 minutes of daily usage. Enough to maintain a streak, complete a lesson or two, and keep the learning habit alive. But not enough for someone who wants to deep-dive into coding for an hour or two.

"Most of our users don't pay us anything, but a small percentage of them subscribe... subscription based so a small percentage of our users subscribe each month and they cover the cost for all the rest of the users."

This creates an interesting dynamic: paying users effectively subsidize education for everyone else. It's a model that aligns Coddy's business interests with their mission to make coding education accessible globally.

Any app can learn how to build similar mechanics by following this guide on how to build an energy system.

The Painful Balance: Retention vs. Monetization

Barak didn't sugarcoat the difficulty of this approach. The energy system frustrates a significant portion of new users who encounter it.

"A lot of the people that come and just use the product for 15 minutes get frustrated that it's not completely free. It is completely free, but with a limited amount of usage every day unless you pay. But we do have to make money somehow."

This is where the tension becomes most visible. A brand new user discovers Coddy, has a great first 15 minutes, then hits the energy wall. Some percentage of those users never come back, annoyed by what feels like a bait-and-switch.

For a retention-focused team, this is a nightmare scenario. You've just lost users who were engaged and excited about your product, all because of a monetization decision.

But from a business perspective, unlimited free usage isn't sustainable. Server costs, content creation, and team salaries all require revenue. The question isn't whether to limit free usage—it's where to set that limit to maximize both conversion and retention.

As Barak put it:

"It is hard. It's a painful area... If you had like a retention team and a monetization team, like they would probably be at each other's throats because they're, you know, they're trying to do like opposite things almost."

Bringing Users Back: Multi-Channel Retention

Losing users at the energy wall isn't the end of the story. Coddy built multiple systems to bring those frustrated users back and convert them over time.

Email marketing forms the foundation. Using personalized attribution data about user behavior, Coddy sends targeted messages based on where users are in their journey.

"We bring some of them back with email marketing, with retargeting on Facebook ads, Google ads, places like that. And when we'll have the mobile app, we'll also use that, like notification and stuff like that."

The emails aren't generic reminders. They're contextual, often featuring Coddy's mascot "Beats" (a half-ant, half-robot character) in situations designed to guilt users back into the platform.

Barak shared one particularly effective example:

"Whenever someone didn't use the product for a few days we send them an email with like a painting of beats where he's very very old, you know with with like a white beard and he's like kneeling and he says we didn't code together for so long and things like that."

These playfully passive-aggressive emails work because they're memorable and create emotional connection. Combined with retargeting ads on Facebook and Google, Coddy builds multiple touchpoints to re-engage users who churned at the energy limit.

In-App Currency: Gems as a Release Valve

Beyond subscriptions, Coddy also implemented an in-app currency system where users earn gems through platform usage. These gems can purchase additional energy, creating a third option beyond "wait for recharge" or "subscribe."

"We also have our own currency in Coddy. So you buy things with gems that you earn when you use the platform rather than things you buy with real dollars and you can buy energy with it as well."

This mirrors the approach that apps like Duolingo have taken, where active engagement can extend free usage without requiring payment. It rewards users who are committed to daily practice while still creating a ceiling that power users eventually hit.

However, Barak was honest about its limitations:

"I guess it does help to a certain degree but it's not very significant to be honest. We have a lot of room to improve in this area."

The gem system helps at the margins, but it doesn't fundamentally solve the retention-monetization tension. It's a release valve that makes the energy system feel slightly less restrictive, but Coddy still depends primarily on subscription revenue from users who want unlimited access.

Onboarding: Hiding the Paywall Initially

One subtle but important aspect of Coddy's energy system is how they introduce it to new users. Rather than showing a depleting energy bar from minute one, they let new users experience the product without immediately seeing the limitation.

"When you open a new account and you start using the product, it doesn't show you that your energy has a lot of more. But when it gets empty, you suddenly get a present. You suddenly get the chest, you open the chest and you get more energy, things like that."

This approach, which Barak noted Duolingo also uses, delays the first paywall encounter. New users get extended time with the product before hitting restrictions, increasing the chance they'll be hooked before experiencing friction.

It's a form of soft onboarding that prioritizes early engagement over immediate monetization transparency. The risk is users feel deceived when they later discover limitations, but the benefit is higher activation rates among new signups.

Coddy experiments with variations of this approach, testing different thresholds for when and how to reveal energy limitations. These tests are challenging to run given Coddy's scale—with around 2 million registered users, meaningful A/B tests require very significant differences to reach statistical significance.

What's Next: The Mobile App Challenge

As Coddy prepares to launch their mobile app, the energy system faces new challenges. Mobile apps enable push notifications, which could dramatically improve retention by reminding users when their energy has recharged.

But mobile also introduces platform fees. Apple and Google both take a cut of in-app subscriptions—15% for the first million in revenue, then 30% thereafter.

Barak's approach is pragmatic: start by accepting the platform fees while building up the mobile user base, then gradually optimize the ratio of web-to-app conversions to minimize fees where possible.

The energy system itself will remain consistent across platforms, but the ability to send push notifications when energy recharges could make mobile users more valuable from a retention perspective, even if they're more expensive to monetize.

Key Takeaways

• Energy systems borrowed from mobile games can work for B2C SaaS by limiting daily usage rather than features, creating sustainable freemium economics
• The retention-monetization tradeoff is inherently painful—many users will churn when they hit usage limits, and that's an unavoidable cost of freemium
• Multi-channel re-engagement using email, retargeting ads, and eventually push notifications helps recover users who initially bounce at paywall encounters
• Delaying paywall visibility during onboarding increases activation rates, though it requires careful testing to find the right timing
• In-app currencies that extend free usage reward engagement but don't eliminate the need for subscription revenue
• Personalized retention campaigns using mascots and contextual messaging significantly outperform generic reminders

Listen to the full conversation with Barak Glanz on the Levels Podcast to hear more about how Coddy balances growth and revenue while serving millions of users globally.