Comments on: Another Stab at the Freemium Thesis

By: Mark MacLeod

Mark MacLeod — Fri, 24 Oct 2008 10:26:10 +0000

Hey Mark,

Much more balanced view. Interesting observations on consumers’ propensity to pay. It is tougher in that sector.

The general rule is 3 – 5% of consumers will pay. We had higher rates at Mobivox.I expect even higher rates for well segmented B2B plays.

Mark

By: Daily Diigo Discoveries 10/24/2008 : phil baumann /rn/

Daily Diigo Discoveries 10/24/2008 : phil baumann /*rn*/ — Fri, 24 Oct 2008 03:32:57 +0000

[...] Another Stab at the Freemium Thesis | Mark Evans [...]

By: Randall Howard

Randall Howard — Thu, 23 Oct 2008 21:34:41 +0000

Mark,
I certainly don’t think Freemium is dead, so I’m glad to see this post where you revise your thesis. Some observations:
1. Freemium is necessitated by the fact that web (and other IT-driven) economics dictate that, at least for many types of businesses, there will be a “Free” out there. Chris Anderson is working on a book about this. He’s answering the WHY – but he still doesn’t go far enough into the HOW.
2. So, you have a choice – to offer the free as a way to disrupt the market and generate a pipeline of users to upsell to your premium service OR to have a competitor do this instead.
3. This issue, as you point out is that making this work is very tricky as there just isn’t enough science on this yet. At Verdexus, we’ve had long discussions with our advisor network on this topic and hope to publish some insights on this in the future.

LinkedIN is a great example of Freemium model generating over $100 million in revenue, notwithstanding their rather “thin” offering. The challenge is trying to make hundreds, if not thousands, more LinkedINs.

And, it’s triply challenging in Canada, especially in these current cash constrained times.

But, my main point is that the “Free” part is not an option – it is driven by a fundamental shift in the distribution economics for many types of businesses.

Randall

By: LinkedIn Raises More $22.7M More. Goldman Sachs Joins The Team, Rumored To Be Underwriter For IPO : tinyComb

Thu, 23 Oct 2008 19:17:51 +0000

[...] Alley Insider, TechCrunch, Search Engine Watch, The LinkedIn Blog, Pulse 2.0, Mark Evans, Startup Wire, ReadWriteWeb, Between the Lines, Blogspotting, VentureBeat, Inquirer, Epicenter, [...]

By: Parker

Parker — Thu, 23 Oct 2008 17:04:07 +0000

I think it should also be added that giving away your service for free to consumers should be considered a promotional activity, rather than simply giving away something for free. People will be more likely to share it, and it can be more easily shared, if there is no cost involved. Right away, you’re able to reach a lot more people through word of mouth, and these people might actually pay for your service.

By: Charles Hudson

Charles Hudson — Thu, 23 Oct 2008 16:58:30 +0000

Mark,

I think the 37Signals guys have it right – you have to have something valuable above and beyond the free product if freemium is going to work. I think there is one space outside of traditional consumer web applications where freemium is working and that’s free-to-play casual / web gaming. In that case, you have the ability for players to play or consume most, if not all, of a game for free. They either pay to a) unlock levels not otherwise open to them or b) exchange money for time by buying powerups or boosters to allow them to advance through the game more quickly. Like freemium, a lot of free-to-play games have relatively low percentages of users who pay but have business that generate tens (or in some cases hundreds) of millions of dollars both in the US and abroad. If that’s not a real business, I don’t know what is.

I think the reason freemium hasn’t worked as well for consumer-focused web services is that most vendors either a) give away too much value in the free product by including too many features or not choosing the appropriate break points or caps for free vs paid or b) having products that aren’t sufficiently useful to warrant payment.