

Freemium has run its course - iProject
http://gigaom.com/2012/07/21/freemium-has-run-its-course/

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dools
I find it strange that this article is placing a paid model in opposition to a
freemium model. Freemium is nothing more than an indefinite free trial with
limitations placed on usage. It doesn't indicate that you don't want to charge
for your products.

Far and away the best execution of freemium I've ever seen is Wufoo. You get a
few forms for free to start using the service and can get genuine utility from
the service. By the time you hit their escalation trigger, if you're genuinely
getting value from the service the cost of change far exceeds the cost of
subscription. If you're not getting genuine utility from the service you'll
find something else. If you never hit one of their escalation triggers then
you're a negligible cost to them and since all free forms advertise Wufoo when
submitted, you're doing free marketing for them, which can be offset against
the cost of supplying those free forms in the first place.

It's a beautifully designed freemium model and, I think, well worth studying
when you're designing your own pricing strategy because it obviously works
insanely well for them!

~~~
wensing
_Freemium is nothing more than an indefinite free trial with limitations
placed on usage._

I disagree in the sense that freemium is also a little understood business
model, chosen by many entrepreneurs by default, with little to no thought.

 _It doesn't indicate that you don't want to charge for your products._

It does indicate that you've decided to not charge for at least one of your
product's benefits, which may be the only one worth paying for.

~~~
dools
_which may be the only one worth paying for_

Then you haven't designed your freemium model very well ...

~~~
wensing
Some products are incompatible with freemium.
<http://wensing.tumblr.com/post/24419082927/freemium-ferrari>

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Negitivefrags
Someone should tell the games industry that freemium is dead.

I doubt that they will hear you over the sound of all the money raining down
on them though.

~~~
soup10
Most freemium games crudely abuse human psychology to get players addicted and
waste their time and money. It's entertainment, sure. But most of the time the
game's are like slot machines, designed primarily to hook users and exploit
them. Not out of any genuine desire to provide entertainment.

I think the freemium model is probably not ideal for many products that people
have a real need for, it just lets people be freeloaders if they don't need
the premium features. There are several freemium services I use that I would
happily pay for.

~~~
brianchu
Welcome to the entire entertainment industry.

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tinco
"which unlike freemium is neither new nor a fad" Because freemium is new and a
fad?

There's nothing in the article that indicates that freemium is somehow bad for
your business. Just opinions of a few people. Which don't even contradict
freemium. SurveyMonkey 'downplays' its free offering, not stops it. Marco
Arment says you should charge for your product, since when is freemium not
charging for your product?

Freemium is not something businesses do because they're ashamed of making
money, it's something businesses do to gain access to a tough market.

Do you think people on the streets are handing out newspapers, soft drinks and
mini-snacks for free because of charity? It is marketing. Can anyone show me
sparrow would have gotten the same amount of attention with close to no
marketing budget if it had only the pay-up-front version?

How many sales would they have lost to pirating if the ad-supported version
was just a trial?

Freemium works, figure out what it is that is worth money to your users, and
make sure people can get it for their money. Pepsi-Cola would love a way to
give their new taste to so many people for free, with almost no distribution
costs.

~~~
drumdance
I smiled when you said "SurveyMonkey." There article is about SurveyGizmo. I
used to work for SurveyGizmo and this (very common) confusion was just a cost
of doing business.

I think it's important to distinguish between consumer and business apps.
SurveyGizmo targets businesses.

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heyitsnick
Is that not gigaom's model?

"First use the free version to drive adoption and build a large customer base,
and then find ways to monetize that base by upselling the paid version and
selling extras."

Gigaom gives away content for free to drive adoption, build a large base, then
upsells GigaOM Pro.

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lnanek2
Google IO before last, Google announced apps with in-app payments were making
20x conventional apps. In-app payments are mostly used for a lower friction
version of freemium than forcing the users to buy a separate pro app or web
site sign up account/subscription.

~~~
wensing
But it's not safe to assume that you can take any product, make it free, and
then make 20x more money with in-app purchases / add-ons / freemium.

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porsupah
An interesting article, but perhaps rather heavy on assertion, and light on
actual data. Would it not, perhaps, be significantly improved by quotes from
publishers and developers who are engaged in both "freemium" and paid models?
Hearing first-hand of what trends they're experiencing would lend more weight
to the assertion that freemium is on its way out.

Personally, I do lean very much toward outright payment for a product or
service - I pay for my LJ account, though free accounts are offered; the few
TV shows I enjoy, I buy from iTunes, at least when they're made available; the
music I listen to, similarly, I buy, rather than listen to on a subscription
service that subsequently offers microscopic payment levels to the artists.

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tsmith
I'd never seen the Hershey's / Ferrero Rocher experiment referenced in the
article (that supposedly "started the free-mania") but couldn't the opposite
conclusions be drawn from the experiment? I.e. that having a free option
(somewhat obviously, perhaps) reduces revenue for the vendor?

In the experiment, when offered the choice between a Hershey's Kiss at $0.01
and a Ferrero Rocher chocolate at $0.25, 50% of respondents chose Hershey's
and 50% chose Ferrero Rocher - for an average Revenue Per Customer (ARPC) of
$0.13. When the price of the Kiss was lowered to $0.00, 90% chose the kiss and
only 10% chose the Ferrero Rocher - for an ARPC of $0.026. All things being
equal, the vendor would have to have 5X the number of "sales" to achieve the
same amount of revenue, and the marginal Cost of Goods Sold/Cost of Sales
would have to be zero to achieve the same amount of profit.

~~~
eps
The experiment comes from the "Predictably Irrational" book. A very good read
in its entirety.

[1] <http://en.wikipedia.org/wiki/Predictably_Irrational>

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true_religion
Freemium is perfect for entertainment products where value is subjective so
users need to be enticed with a try before you buy mentality.

With a B2B product, I think the best solution is a trial period to lock the
user into the project, and demonstrate value over the long term before asking
for money.

~~~
wensing
Stormpulse is now B2B, but we started with a multi-year "free trial" for
millions of people - i.e. freemium. This was obviously critical for
distribution / adoption, but ultimately wasn't profitable.

~~~
genwin
I checked out the site. Nice! The paid tiers are named "Entry" and
"Operational", whereas the free trial tiers are "Entry" and "Enterprise".
Shouldn't the names of the free tiers be consistent with those for the paid
tiers?

~~~
wensing
Thanks for the catch! This was a recent change.

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tlogan
My understanding is that free part of freemium is a just a way to promote your
product (i.e., marketing costs). I learned that people who chose free will
probably _never_ pay - however they can do a lot of work for you for free.

~~~
wensing
In some cases, a lot of the people using the free version will pay if you
force them to.

~~~
tlogan
I agree. May I ask, how would you test that with existing Free users? Make
free tier more restrictive?

~~~
wensing
You can always try moving "the line" between paid and free with A/B testing,
though I admit it would be rather elaborate. You can also be sure that you're
forcing them to choose by taking away the free tier altogether. I'm not sure
how you'd A/B test a business model change, though.

In our case we took away Free altogether and replaced it with Free Trials. We
didn't A/B test this first, but we could tell it had a decent chance of
working based on what our users had been telling us.

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wensing
I'm quoted a few times in this article, but I do think freemium can work. The
key is knowing if it can be profitable and sustainably so given your product
and market. I recently dissected this issue in a blog post:
[http://wensing.tumblr.com/post/25167979206/the-anatomy-of-
pr...](http://wensing.tumblr.com/post/25167979206/the-anatomy-of-profitable-
freemium)

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rlalwani
The problem with Freemium model is that there are many people, > 95% in my
opinion, who only come for the FREE part. Less than 5% users actually pay. But
you end up paying for the infrastructure costs for all 100% of the users.

