

Ask HN: Free-to-Premium business models. Any working examples? - netcan

Just like 'ad supported,' I get the feeling that a 'premium accounts supporting free accounts' model is thrown around too freely. Something that can be thrown in later in the game, after you're popular, to generate revenue. How many examples do we have of this model working out? I'm not really referring to the high price-per-unit premium services (customised/B2B), I think they're an independent category. I am also not referring to services where the 'free' version is essentially a sample. I think the free version would need to be useful in itself to qualify for this category. So I'd naturally expect the majority of users to be using the free version.<p>I think this is an natural in context example: 
http://news.ycombinator.com/item?id=302142<p>My immediate thought is that unless the service is immune to competition, a service with virtually 0 marginal cost per customer, is a bad fit. From that I'd further speculate that using premium-only <i>features</i> &#38; ad removal to differentiate free from basic is not the best route to take. A premium service that costs the service provider something (eg storage) is probably preferable.<p>One to watch is naturally Google Apps Premium Edition. Interestingly Google Apps uses all three selling points - more storage, ad removal &#38; additional features to upsell. Considering the resources that have gone into these apps over the years &#38; their level of success in the free end of the market, it's a high bar before you could plausibly take this as a case study in the success of this particular business model. Maybe 1/2 - 1 million paid accounts ($25m - $50m per year) could be called a borderline case. 
http://www.google.com/a/help/intl/en/admins/editions.html<p>So. If anyone has interesting examples please share. Info on how they're doing, as well as stuff like what the free/premium ratio is like would go down well.
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webwright
37Signals stuff, Wufoo, BlinkSale, Flickr, Freshbooks, RescueTime, Harvest,
etc.

If you want some good data, you'll really want to read this:
<http://particletree.com/features/web-app-autopsy/>

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netcan
Thanks for the link.

Wufoo & BlinkSale are interesting cases. I was surprised to see their
conversion rates so transparently out there. But services like Freshbooks,
RegOnline, RescueTime & 37 signals stuff are not really what I'd call part of
the 'Freemium' business model. The free version is either limited in time or
functionality to the point where you can't be a 'real' user (like you can with
Gmail or Dropbox) without being a paid user.

Even BlinkSale is kind of borderline case. Serious users would 90% of the time
need a paid account. Wufoo is also near the 'sample' end of the spectrum
though it looks highly usable with a free account.

Nothing wrong with that of course, non one says you can't sell services.

Also they're all in the business tools arena. That's definitely an area where
paid tools are likely to succeed. But it's an area that (as you can see from
those examples) it's pretty straightforward to sell software subscriptions.
But they really don't get us anywhere near a facebook premium.

Flickr is potentially a good example. It's consumer oriented & I'd guess the
great majority of users are always going to be free users. But is it earning
it's salt this way yet? Or is it still in the wait & see category with Google
Apps Premium?

BTW I downloaded dropbox today & I can see myself paying for the service, but
also see myself using the free version.

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froo
I am very fond of the freemium model, but recently I've been considering that
there must be better ways to convert users to profit beyond scaling the number
of users or adding additional functionality.

Have you given much thought to variations on fairly standard business models?

We've applied for YC this round, and one of the things we're trying to achieve
is to successfully adapt a freemium model for a product that has been
traditionally something that customers would pay up front for. The market is
already one that is very profitable and our philosophy is that eventually
products in our market will be free, so we want to be the ones who give it
away first. We want to do this not only to experience the benefits that come
with the freemium model (adoption + potential viral growth) but to also help
insulate ourselves from competitors doing it to us.

Without going into too much detail, after some recent discussion (or perhaps
it is just paranoia speaking, this occurred about a week ago) we feel that
while a freemium model is still the best framework for our particular concept,
it comes with a couple of drawbacks¹ that we hadn't originally conceived, so
we have had to think a little outside the box.

Right now, we're considering if a hybrid trial/freemium² model might provide
us with what we are looking for. Essentially we envision this to be where a
user would receive a fully featured product at the start of their product
lifecycle, which after awhile degrades into a functionally sound but less
featured and free version. The absolute last thing we would want to do is
annoy a user by handicapping their product into something unusable.

We think this might provide a user more of an incentive to want to upgrade to
a paid-for product beyond the simple fact that they have access to more
features/bandwidth/data, while still maintaining our core freemium philosophy.

Also given the nature of our product, we do have room to add in some further
functionality in which the addition of a surcharge on further transactions
could be warranted, but we would have to further explore the specifics, so
perhaps that is another option available to you?

Notes:

1) If PG is reading this and is seriously considering our application and
needs to know more about point 1 above, please feel free to email me and I can
explain

2) I can't name anyone offhand who is using a trial/freemium hybrid but would
love to know if anyone can point me to someone who is using this (or if we're
just over engineering the problem).

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netcan
When I posted this, I was looking for working examples of the freemium
business model on the Google Apps/Flickr end of the spectrum - mostly about
the free users. (They're not examples because I don't think they're pulling
sufficient revenues yet. Correct me if I'm wrong)

From what I've gathered, there are more examples at the other end of the
spectrum closer to the 'free sample' - free users get a good, usable trial,
but premium users are what it's about. I'd call that more of a sales method
then a business model.

Anyway, from that I'd say that _a hybrid trial/freemium²_ is a reasonable
idea. I would put more chips on the product if it's for businesses.

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jacobscott
Chris Anderson's article on Free in Wired is six months old but probably a
good reference if you haven't seen it:

[http://www.wired.com/techbiz/it/magazine/16-03/ff_free?curre...](http://www.wired.com/techbiz/it/magazine/16-03/ff_free?currentPage=all)

I guess his book isn't out yet but it looks like he's blogging about free @
the long tail:

<http://www.longtail.com/the_long_tail/>

~~~
netcan
Actually, I had read that article but forgot about it. It's probably where I
got my description of the model. It's a good article. Gives you a feel for the
context of all this. I totally agree that free services have gotten a major
upgrade as part of the economy & that it makes sense. But on the incentives to
service providers, they just list a few: advertising, cross subsidy &
_freemium_.

Advertising is an old one. We know that one from the TV/Radio/Magazine world.
We also know it's not capable of funding every type of popular free web thing.
(Great on Search, less great on Facebook).

Cross subsidies - Also pretty straightforward. Real estate site provides
tools, Google gets people to like them etc. etc.

Freemium, on the other is not as well trodden. Especially if your strict about
excluding free samples from the category.

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tstegart
Isn't Flickr the perfect example? I know a lot of people that pay for it, and
a lot of people that don't. Some blogging platforms also use the model
successfully.

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rantfoil
Smugmug is a pioneer in this.

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netcan
Can you elaborate? I see _Start your 14 day free trial_. Is there a usable
free version?

~~~
rantfoil
Hah, right. I forgot... they are just straight premium. My mistake. ;-)

