

When Freemium Fails - cwan
http://online.wsj.com/article/SB10000872396390443713704577603782317318996.html?mod=WSJ_hps_MIDDLE_Video_second

======
luckydude
I can relate to this article though I was even less smart than any of the
people interviewed. I choose to give away BitKeeper because I wanted to help
Linux. There was absolutely no business model, freemium or otherwise. We
eventually stumbled upon the privacy costs money, out in the open is free
model but it was always sort of so-so.

In retrospect, what I should have done is make 2 differentiated products, free
and paid. Free is basic, no guis, just enough to get the job done for the
kernel and paid has all the bells and whistles.

We actually thought of that at the time and I rejected it because at the time,
before Linus was using BitKeeper, I felt like if he didn't get the good stuff
he wouldn't use it.

Pretty stupid from a business point of view, kinda makes sense if you look at
it from a help Linux not fragment point of view. Kinda.

------
anigbrowl
Goddamit Clement :)

One of the problems with the freemium model is that many people sometimes seem
to pick a revenue target arbitrarily and then backfill their projections with
the necessary conversion rate. Obviously, few firms or entrepreneurs want to
expose their pricing models publicly in forums like HN, but startups need to
be able to answer the question of what marginal utility they provide to their
potential customers. The 'less than a cup of coffee!' model of app pricing,
for example, assumes that since coffee is such a small thing users will be
just as willing to throw down $3 for an app. But the coffee has physical,
psychological and social value for the consumer that pays off on a predictable
time horizon - and pays off not just the $3, but the time spent standing in
line or buying and brewing your own coffee. Consumer preferences in for this
commodity are sufficiently complex to support a large and extremely
competitive market. If it was 'just coffee' then it would cost the same
everywhere and vendors would be limited to normal rather than economic
profits.

A better approach for vendors might be to assume your target consumer does
_not_ have endless disposable income. What value does your product or service
provide that would make a coffee consumer go without their favorite beverage
for a day? Or if not coffee, a competitor's offering or some other part of the
consumer's _status quo_? How does your offering compare to the composite
bundle?

------
Lasher
Interesting article but a little misleading at the start. That first example
(billing management software) touts 900 paid users @ $65 per month after
moving away from the freemium model, but how many of those 900 users would
have never become users at all if the software was not initially free? It's
much easier to start charging a customer once they are locked in and familiar
with the software. Maybe a "first year is on us then it's paid" model is a
good compromise between freemium and paid software, with the option to upgrade
sooner if you want support and/or some advanced features.

------
hatu
Aren't most companies always under 50 employees? That sounds like a terrible
idea. How often does a company grow massively, and when they do they often get
their own dedicated accounting teams.

