
'Free-mium,' self-funded models set to gain traction  - johns
http://news.cnet.com/8301-13846_3-10127788-62.html
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puzzle-out
Free-mium is a very precocious model. It is very difficult to get the balance
right in service terms, namely how do you decide what to put in the premium
service and not in the free one. The free-mium model has never taken traction
in other industries, as normally for something to be commercially viable, the
free service should be good enough for people to pay for it. Think of
Shakespeare's theatre - people were prepared to pay for even the crappest
places in the audience because the product itself was good. I think tiered,
subscription based business models will be the most likely development,
especially in a recession when the main barrier to going down the subscription
path - that a competitor could come along and offer the same service for free
- is becoming less relevant given the VCs are becoming less willing to
subsidise such practices.

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skmurphy
Pricing is always a challenge, freemium just introduces a "free trial" tier
that can be temporary or permanent.

Other industries have variations: e.g. semiconductor companies give away
complex datasheets and simulation models to give prospective users an idea of
what the part can do. Especially when you are offering a distinct or new
experience you need to give you prospects some way to appreciate what they can
accomplish with your offering.

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medearis
Its interesting that Rosenberg focuses on the self-funded model only for what
he calls "ecosystem" startups. I disagree that the issue is risk in that way
that he describes -- i.e. that Facebook or Apple could theoretically crush
these companies quickly. Instead, I think the issue is more that the platform
itself is unstable. Particularly with a limited platform like Facebook, nobody
really knows if these apps will be profitable in 5 years, and even then, what
the growth of an "app within an app" will be. Since VC's are generally
interested in the big payouts, it always seemed to me like funding Facebook
app companies was largely outside the VC domain.

That said, I generally agree with the big picture about self-funding -- its
pretty much in line with what PG said in the recent essay about VCs in this
recession.

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Fuca
Freemium model seems very fragile unless you achieve enough visitors to sell
directly the ads.

Otherwise you really have to get a lot of visitors to make decent money.

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trapper
I wonder how many people actually use the "free" side of the freemium model in
practice. I know I signed up for a ton of apps but never actually used them.

