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It depends on the product. In some products, there may be "network effects" where each user benefits by the number of other users in the system-- for example, i
by michael_dorfman 16y ago
It depends on the product. In some products, there may be "network effects" where each user benefits by the number of other users in the system-- for example, if Facebook were to adopt a Freemium model, the paying customers would benefit from having the free users in the system.
This, of course, is not the case for most apps-- like Dropbox, in the example you chose. For Dropbox, the free customers have costs associated, but largely serve as a funnel. In other words, the costs of the free users are just considered part of the customer acquistion costs, the same as if they were Adwords costs with a given conversion rate.
I don't think big numbers strike an emotional chord with VCs when it comes to financing rounds, if by "big numbers" you mean "big numbers of non-paying users", unless there are plans to improve the conversion rate on these prospects.
If I were you I'd frame the question another way: given the product/app that you are planning, what advantages would a Freemium model offer over, say, a free limited-time trial of a paid-only product?
- maguay 16y agoActually, I think Dropbox has a network effect as well. I'm a paying user, but my account is more valuable to me because can share folders and collaborate with free users. Many of them would not use it if it wasn't free (hey, I started with the free service and later upgraded myself), but since its free they have seen how awesome it is and are 1000% more likely to upgrade to a pro plan than if they'd never started using it in the first place. In the mean time, they make my Dropbox account more valuable to me.