Menlo: 97% of Consumer AI Users Remain on Free Tiers

Most consumer AI users still do not pay for premium plans. According to Menlo Ventures, about 97% of consumer AI users stay on free tiers. Only about 3% pay for premium access.

The figure comes from the firm's 2025 State of Consumer AI report. It points to a growing business problem in the sector. Usage is rising fast, but subscription revenue is not keeping pace. For many AI companies, that means growth does not always lead to a strong business model.

Menlo does not present the report as a full count of every AI platform. It is an estimate based on survey data and market modeling. Even so, the message is clear: paid conversion in consumer AI is still low.

Why it matters

For developers and publishers, the takeaway is simple. If most users stay on free plans, subscriptions alone may not cover demand. This matters even more for products with recurring inference costs. In many cases, each new user adds cost before revenue catches up.

That is one reason the industry is looking beyond the paywall. Contextual ads, sponsored recommendations and other in-product revenue tools are getting more attention. Companies now discuss them less as side experiments and more as practical ways to support free-tier usage at scale.

What the number does not say

The 97% figure is not a rule for every product. Conversion can change by category, geography and use case. Enterprise software, coding tools and professional workflows may convert better than general consumer assistants.

Still, the broader picture is clear. Consumer AI reached mass usage faster than mass willingness to pay. For builders, the question is no longer whether to monetize free users. The question is how to do it without hurting trust, utility or product experience.