

Freemium is alive and kicking - SebMortelmans
http://www.davidgcohen.com/2012/08/22/freemium-is-alive-and-kicking/

======
revorad
One thing that is hardly ever mentioned when evaluating freemium is that you
need deep pockets to survive until enough people start paying for the premium
offering. So it almost never makes sense for bootstrapped businesses. The best
bet is to figure out the market first with a paid version, and then use free
as a growth engine, just like Mailchimp did.

Before blindly adopting freemium as the default pricing for your app, think
long and hard about this:

Freemium has a longer sales cycle than _enterprise_.

------
casca
The difficulty with getting freemium right is in having a free product that's
sufficiently useful to have people take the time to use it and a paid version
that is worth paying for.

Convincing someone to switch from paying $0 and $1 is hard, much harder than
$1 to $10. If there's not enough value in the paid version, why switch?
Finding that killer feature that will cause people to pay without chasing off
the free users is hard.

~~~
revorad
Lots of people are led astray by this belief that there's a killer feature
that causes people to pay. Usually, there isn't one.

For example, I run a data visualisation SaaS app. For a long time, I tried all
sorts of combinations of free and premium, but no one was upgrading. When I
spoke to my users, the most serious ones kept saying they would be happy pay
for the free version itself because it solves a big problem for them.

I ignored them because how could I have any pricing model other than freemium,
right? But, I kept getting the same feedback consistently.

And then it hit me - the most successful freemium companies give away the most
valuable core part of their product for free.

Once they've got people hooked, they can sell premium services so that their
users can get even more of the core value.

For example, the value of Dropbox is not lots of disk space. It's the hassle-
free file sync, backups and easy file sharing with friends and family. 2GB is
more than enough for most. But you can pay a bit to buy more space to get even
more of those core benefits.

You pay for something mundane to get more of the priceless.

But, like I said in the other comment, the catch is that you have to have deep
pockets to survive long enough to get to critical mass. Some people may get
lucky and bootstrap a freemium business quickly, but the odds are low.

And that's why I settled on doing away with freemium and just straight selling
a product with obvious value to a good number of people.

------
acabal
My site, Scribophile, was freemium from day 1 and was profitable from day 15.
Freemium is still an excellent way to hook people on a service, because
there's no risk to them. If they find your service truly useful, they'll pay
without question.

I am, however, thinking of dropping the freemium model. Not because it wasn't
successful, but because now that Scribophile has an established reputation,
requiring an up-front payment would help keep out trolls or members who aren't
interested in participating. The idea is to improve the quality of the
community, not take a dive into my swimming pool full of gold coins. But I'm
still pondering if that's the right decision.

~~~
dangrossman
I've been running W3Counter for around 8 years. A fraction of 1% of its users
pay anything, while a significant number of people log in to the site multiple
days a week for years. They obviously find it useful, but they have no reason
to pay.

> If they find your service truly useful, they'll pay without question.

If they find your free service truly useful and it meets all their needs, why
would they give you money?

~~~
dchuk
This is exactly right. By offering a truly free option (not a free trial)
you're planting a seed in the user's mind that they can, in some way or
fashion, get your product for free. In some form, your product is free.

This will shape them psychologically to be ok with the lesser free version in
most cases.

Freemium does work, but not just because it gives users an opportunity to try
something out with no risk. So do free trials. Very very few companies
actually do freemium right, and would stand to benefit from a free trial
instead (which doesn't have the same psychological implications that a truly
free plan has)

------
anigbrowl
(from a thread yesterday about when Freemium fails)

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?

------
tlogan
It is also important to understand and investigate whether free users are
helping your business or not. Not all business have network affect like
Dropbox and can benefit from free users.

Sometimes, free users are actually hurting (they will write bad reviews, send
hate email and write hate posts saying that "I don't want to pay", etc.)

For example, 37signals Basecamp does not have free tier any more. It would be
great to hear from them why they decided to remove it and data behind their
decision.

------
mmuro
I think freemium is a great model if you can find the right mix of bringing in
new users as well as upgrading existing users.

Some are going to stick with free forever as long as it fills their needs.
However, some are going to use it so much that, if the price point is right,
the upgrade is a no-brainer.

------
njx
My cloud BI is absolutely free (<https://my.infocaptor.com>) but I make it
from the enterprise downloads.

I have now an idea how to keep the service free for ever and charge only for
certain things.

------
antonioevans
Is this a YC vs Techstar philosophical difference?

~~~
seats
I wouldn't say so. -> <http://news.ycombinator.com/item?id=4421764>

If anything I think both YC and TS just reflect the wider market with some
extra noise and ideally better outcomes.

