
Case Studies in Freemium: Pandora, Dropbox, Evernote, Automattic and MailChimp - mcav
http://gigaom.com/2010/03/26/case-studies-in-freemium-pandora-dropbox-evernote-automattic-and-mailchimp/
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MicahWedemeyer
I didn't understand this quote in the first line: _only charge for things that
are hard to do_

I've found this to be absolutely untrue. Don't let implementation difficulty
factor in the decision whether to charge for a feature or not. The only
exception to this is when choosing not to do something altogether because it's
too hard.

On Obsidian Portal, we charge for some of the simplest things (like the
ability to send e-mail notifications of changes), while giving away some of
the hardest things for free. In my opinion, it's about providing a useful
product for free, while constantly presenting a premium product that would be
more useful. The decision about what to charge for should only be made in
terms of how useful it is to your users, not how hard/easy it is for you to
do.

~~~
jamesbritt
"The decision about what to charge for should only be made in terms of how
useful it is to your users, not how hard/easy it is for you to do."

This was a lesson it took me a bit of time to learn. As a
contractor/consultant I needed to figure out what to bill. I started out
thinking in terms of how hard something was; if I had to bust my ass, then I
was going to charge for it, and if something is easy, how can I justify a high
rate?

Which, as it happens, is idiotic.

The real metric is, How much value am I providing?

Realistically there are some constraints, such as what are competitors
charging (a concern if you don't want to chase potential customers away), but
personal effort is not a main factor.

There's a belief that hard work should be rewarded, but that just encourages
people to work hard regardless of the end value of their efforts. _Valuable_
work should be rewarded. If you can do it with out breaking a sweat, more
power to you.

You're kind of screwed if you go about thinking that because you worked hard
on something that people will ultimately find it valuable and reward you. That
only happens in some politician's stump speech fantasy.

------
cryptnoob
Here's my problem with Freemium.

There is the mindset that you'll win the lottery, get bought out, and become
rich. It's all about users, not revenue. It becomes a lottery, where a few get
very wealthy, and the rest make nothing. That's not Freemium, of course,
that's "free", as in twitter, facebook, etc.. However, to me, Freemium is
almost as bad a bet.

With Freemium, I end up burning so many resources with scaling issues, trying
to service all of these non-payers, hoping I'll "win the lottery", by getting
enough actual payers to finance things. The examples they gave were good cases
in point of services that struggled under the load of the non-payers for a few
years.

I would like to just charge from the get-go, and avoid the scaling issues that
freemium implies.

~~~
jolan
I think there's a fine line between freemium success and profitable failure.

If you give away too much, there's no incentive for users to pay for upgrades.

If you don't offer some sort of free account, it can be hard to get traction.

In the case of dropbox, it seems a lot of users are content with 2GB for free.

What would happen if they dropped that to 256MB. Would they get more
conversions? Or would users simply move to a 2GB freemium competitor?

Hard to know what's best.

~~~
dagw
I wonder what would happen if they offered a 10-15 GB option at half the price
of the 50GB option. I know a few dropbox users who keep hitting the 2GB limit,
but don't want to upgrade because they think 50GB is more than they need and
they'd feel like they're paying for something they're not using.

------
paraschopra
All I read from these case studies is that unless your product is targeted at
the masses, you should avoid Freemium. 0.5% ratio of premium users is simply
too low.

~~~
netcan
A ratio for 'freemium' as a whole isn't really all that informative and you
shouldn't make any decision based on it. I think you can expect completely
different results depending on your specific case. 30% & 0.03% are both
possible in different circumstances.

Also, since the definition of 'user' is pretty loose, you can't really use
these numbers to make any assumptions about the cost of serving them. If a
free user stops using a service, he doesn't cancel his subscription. A paid
user does. Freemium users are also hard to distinguish from trial users since
the two are often amalgamated.

