

Freemium Model - EGF
http://spencerfry.com/freemium-model

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MicahWedemeyer
An important point to mention in segmenting your features is that the _main_
thing to consider is the value a feature delivers to your users. If if
delivers considerable value, consider making it premium.

Contrast this to "hard vs easy" thinking. Sometimes you may feel like you
should charge only for things that were hard to develop. Discard this feeling
right away. Users don't care how hard you worked, only what value it delivers.

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fr0man
One successful example of this he doesn't mention is games. Several large-ish
MMO's basically operate on this principle (Adventure Quest, Dungeon Runners
and Runes of Magic to name a few). It's basically the exact same idea he's
talking about, though games do have a very different incentive model than a
business or professional service.

Edit: Turns out Dungeon Runners is no more. Sad, my wife and I really liked
that game.

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duck
I would recommend Chris Anderson's "Free: How Today's Smartest Businesses
Profit by Giving Something for Nothing" book - [http://www.amazon.com/Free-
Smartest-Businesses-Something-Not...](http://www.amazon.com/Free-Smartest-
Businesses-Something-Nothing/dp/140131032X) to anyone interested in this
topic.

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yosho
The main problem I have with the Freemium model is the same problem I have
with the advertising model, both require a large userbase before any
substantial revenue can be made.

I wonder if anyone has done a study on the Freemium model vs the Free Trial
model and see which one generated more revenue.

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spencerfry
Both the Freemium model and the Free Trial model require a lot of people at
the top of the funnel. Speaking from what I've heard from friends
(Squarespace, Harvest, etc.) who use the Free Trial is that they require the
same amount of users at the top of the funnel as the Freemium model. The main
difference is that they only have to support 1 version of their web app
instead of a segmented free and paid version. This means you don't have to
think about segmenting features, supporting free users, etc.

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justinchen
Interesting point about needing the same number of people for the funnel.
We're actually in the middle of transitioning one of our sites from Freemium
to Free Trial because we feel like we're leaving too much on the table. As a
small company, it's definitely a bonus to bring in the same amount of revenue
and have lower costs due to less overall customers.

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goodmitton
I looked at your profile, are you refering to theweddinglens.com?

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justinchen
Yeah, we actually just revealed the new plans on Friday.

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bandhunt
Thanks for the article! Any thoughts on breaking a premium service into
smaller (bite-sized) offerings?

See my ASK HN: <http://news.ycombinator.com/item?id=1436734>

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ahoyhere
Spencer delivers as always!

Since we do something really different, I thought I'd share:

Almost uniquely among services that offer freemium, ours is extremely
crippled. We offer only one project and no invoicing.

Most people who sign up for the free plan (instead of the 30-day paid trial)
are just window-shoppers -- only 17%-20% on a monthly basis actually ever
enter more than 5 entries. And entering 5 entries takes less than 30 seconds,
so that's a ridiculously low bar. (We count these as "active.")

But of those, 25-35% upgrade to a paid plan.

That leaves us with a 3-5% free-to-paid rate out of the total pool of free
accounts, which is normal. But what really makes me excited about it is the %
of active users who upgrade.

I chalk this up to the extremely limited nature of the free account -- it
makes a good case for the software, it's a good first taste, but if you want
to really use it, you have to pay.

People are afraid of this strategy, but it works very well for us.

So now, other than broadening the mouth of our funnel as Spencer put it, my
main focus is on increasing the "consumption" of new users (getting them to
really give it a good try-out). Based on that active-only conversion rate, to
use it is to love it. So if I can only get more people to actually use it...

