Freemium is dead? Yeah, if you didn’t get it right!

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Freemium is dead? Yeah, if you didn’t get it right!

Whole lot of people are putting coffin to freemium model. But before you do that, there are a few important points that one needs to understand.

First of all, lets look at few products that were either declared dead or removed the ‘free’ tag:

  • Google Catalog Search/Video and Dodgeball are dead.
  • No further development on Google Notebook. Jaiku will be released as an open source Jaiku Engine project on Google Code under the Apache License.
  • Jott, voice-to-text mail service has closed its free version (TC)
  • Feedblitz (feed to email) service is not accepting free publishers anymore.

These were all free services that aren’t free  anymore – some due to no traction, and some because of their core model.

Definition of Freemium

“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.” – wikipedia

It’s really important to note that Freemium means that free is part of your business model – and not the entire business model.

Freemium Needs an Extension

Before you declare freemium dead, do understand that freemium misses 1 very important part of your business model – the Food Chain

By food chain, what I mean is who in the food chain is going to pay for the “mium” in your free model.

Example – lead generation business. The whole leadgen business gives away freebies to users (they don’t charge users), but businesses pay lead gen sites for access to these users (for e.g. a typical apnaloan model).

Are these leadgen sites following freemium model? i.e. Free – for users, Mium – to customers.

To summarize: Difference between Users and Customers – Users:Free, Customers:Mium (entire Google/Yahoo model is based on this).

The challenge with any consumer focused business model, is of course to grow your user base, so that customers find it attractive to do business with you.

But before you charge your users, answer these questions:

  • Where is the premium-ness of your product/service?
  • Is premiumness in the feature (that a free user will pay for – to move up the feature-chain)?
  • Is premiumness in the reach (so that somebody else will pay for your audience, i.e advertising)?

Of course, a lot matters on what value you are delivering to your users/customers? Is it incremental or something very substantial?

What’s your opinion?

Next Article: How to quantify “Value”

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