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- Freemium Summit 2010 – An Event Focused on the Freemium Business Model
- Does LinkedIn Want to Be a Part of My Daily Life? Facebook Sure Does
- Google Nexus and Creating an Android Exemplar
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Thanks for the real world example. Your experience matches what I would expect to happen - some users will never cross the "penny hurdle" and I'm glad to hear that making that change worked for you.
I'm reminded of the old adage on learning to fail fast. The Internet allows us to do an incredible amount of market research in literally hours, allowing us to determine whether our assumptions are valid or not. Of course, all of the market research in the world won't save a business manager who willfully sees things the way they want to see it, facts be damned.
Most web services are based on capturing a lion's share of a certain type of user interaction, such as taking mobile photos of travel destinations or entering reviews about popular recipes.
The Forrester social market profile data, available free, helps web entrepreneurs compare their assumptions against validated user behavior. This allows them to construct the most elegant offering by ensuring the freemium offering meets the key needs of their most important user group. The Forrester tool enables businesses to determine how likely their targeted demographic will engage in the desired behavior. For example, if your service depends on seniors that chat while playing videogames at the same time, you might have a tougher time.
http://www.forrester.com/Groundswell/profile_to...
Thanks for the kind words. I'm a big believer in failing fast - it either helps people figure out which of their assumptions weren't true or to move on to something else where they are likely to be more successful.
This isn't the right space to go into the vagaries of dual currency, Daniel James, Matt Mihaly and others have spoken well on the subject, but essentially by allowing for a currency more or less tied to time spent, and another tied to dollars spent, and floating the exchange, you enable your entire user base to be more or less monetized without having to barrier off some large set of the users.
Just a thought, keep up the great posts.
Yes, I agree that for games, the FTP model allows you to do things along the lines of what Matt and Daniel are already doing. And it's clear that the subscription paywall does restrict the audience for games and that you can radically expand reach by making a game free.
What I'm struggling with, however, is whether there is an FTP equivalent for non-entertainment web products. I haven't come up with the dual-currency silver bullet equivalent for web products that are not games.
http://lsvp.wordpress.com/2008/02/06/using-dual...
http://www.brokentoys.org/2008/09/25/how-to-sto...
Chris Anderson was on BBC Radio 4 recently discussing business models with a free aspect:
http://www.bbc.co.uk/radio4/news/inbusiness/inb...
If you're in beta, I think it's probably a good idea to spend more time working on features while you hash out the business model. But you still need to think about life post-beta.
As for LinkedIn, I think freemium is working well for them (I think it has more to do with audience segmentation - they charge the users who see value in paying for broad access and offer a good free version of the product to their general users. This makes sense because having the free users actually makes the service more valuable for those who are paying to access the network). They're doing 10s of millions of dollars in revenue, so they must be doing something right!
I was always a little suspicious of LinkedIn's revenue though; I was under the impression that only a small fraction of users were paying and that (among other things) was the reason for the CEO swap. I certainly could be wrong. I am curious what their ad revenue looks like though.
The shareware model that you are describing and tend to favor proved to be THE MOST efficient for the software mass-distribution over the past decade. In my opinion it happened because it feels equally fair to the people in cash-based cultures and credit-based cultures.
By the way, we created a group on LinkedIn lately fully devoted to Game Payments and distribution of digital and virtual goods. I sent you an inmail with an invitation there but probably you missed it. The group is here: http://www.linkedin.com/e/gis/1192457 That's exactly the type of topics we are discussing there, I thought you might be interested to join too.
Regards
If you find that sales are generated more successfully through a higher touch model (i.e. demos, etc.) then offering anything for free is a challenge, because you have to exert more energy to make a sale but the sale brings in $0. I think of http://www.hubspot.com as a good example. No free trials. No free version. And the sales process involves a demo. That's a high touch model where it would be silly to offer the product for free.
So beyond just the business model and whether some form of freemium works, companies need to evaluate how they're going to market and sell the product as well, and understand how their market wants to be sold. That can impact the business / revenue model.
(Incidentally, I found your site through http://www.startupcfo.ca where you left a comment.)
Thanks for the comments and I appreciate you contributing to the discussion. I agree that this issue is pretty much moot when you have a high touch model. In those cases, it might make sense to have a free trial period to let the enterprise try out the product - many enterprise software companies do those. But a perpetually free version? Unless it's an open source product, that's a tough way to go with a direct sales model.
I too use Highrise and I like it. I too started off with the free version, but I knew that I would have to upgrade pretty quickly. I think the 37Signals guys are probably some of the smartest when it comes to versioning.
At the end of the day, though, I would have been just as happy starting with 1 month free of Highrise Solo edition as I was starting with the perpetually free version - it became clear to me fairly quickly that the product was worth the cost.
Your thoughts?
I tend to agree with you - unless the ads are really obtrusive (which is an issue in and of itself), I've never been terribly convinced that removing ads as the primary value add can move the needle.
If a product has features that clearly have value associated with them, yet it's possible for users to get a taste for the product without those features, then offering a free version can be logical. For instance, WordPress allows anyone to cretae a blog for free, but charges when it comes time to map the blog to a domain or customize the CSS. Any serious blogger will want, and be willing to pay for, those features. There is a clear upgrade path for a target audience, and their pricing has a correct (in my opinion) cost/value ratio.
Free trials, on the other hand, can make a tremendous amount of sense if the target audience most likely has a budget for the product, but needs to be convinced either of the category (that they need *any* type of similar product) or your particular product. For enterprise software, it's almost a requirement that companies be allowed to try out applications as a part of the sales process. If the product offers real value, companies will be able to perceive the value within the time allotted and be more than happy to pay if the price is right. It's trickier when companies aren't yet convinced of the category value, but a good sales person can usually work through this during the free trial.
Now, the trickiest situations usually arise when the target audience varies, and the product's total value won't necessarily present itself to the adopting user. BaseCamp falls within this category. Users can range from independent contractors and small startups to enterprise customers with big budgets, all of whom will need some time to use the product with their colleagues. BaseCamp's model works very well for them, since the upgrade to paid plans will only be required in two scenarios: 1) a consultant/contractor grows to more than 15 clients, by which point the product has presented a lot of value and a budget has been made available, or 2) the customers already has a large number of projects, and project management software will present immediate value once the group gets on board. So those that started free will upgrade when the time is right, and those that already need paid plans get the chance to try them for free, with no commitment. Those that have no reason to pay are not asked to do so.
The price/value structure is definitely the trickiest part of planning a business, but once you figure out the "will pay for" features, choosing between a free trial, free version, or both, should be easy.
http://landscaping-ideas.the-mnm.info