4 ms·

There are many examples where freemium model works though.

by rplnt 15y ago

dean 15y ago
I'm interested to see examples where the freemium model works. Could you provide any links? I've typically read that they don't work. For example: http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-work/ http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-...
- jgmmo 15y ago
  Just in my industry: AVG, AVAST, AVIRA, BitDefender, MalwareBytes, SUPERAntiSpyware All offer a non-trial/non-expiring 100% free home user version of their security software, with a more feature rich premium option available for payment. Freemium works like gangbusters in some industries.
  - dean 15y ago
    It would be interesting to see some numbers though. I wonder what percentage of free users upgrade to a paid version. I wonder what it costs to support the free users. I have to assume it works for them, or they probably wouldn't have lasted as a company. But, speaking anecdotally, I've used several of these products and have never felt the need to upgrade. Also, you could make a case that these are not truly freemium, since any commercial use requires payment.
    - rplnt 15y ago
      AVG went public 2 weeks ago, some info might be available in their SEC filing.
      - yread 15y ago
        AVAST went public in November, too
    - jgmmo 15y ago
      About 1% is a good estimate. At first glance you might think this is bad, but actually -- the freemium model provides boatloads of word of mouth. Even if only 1% buy - a large % of the other 99% are still satisfied and tell people, which throws more folks in the funnel and leaves the company with a large surplus of goodwill. We have people routinely write in to us - 'Ive used your product for years and it's worked so great I just want to help contribute' and so they buy a license - just out of gratitude from years of free service and not because they are looking for any of the Premium features. Regarding the 'cost of free users' - the cost is negligible. It's not like we write different definitions for the premium and the free - they all share the same definitions so there is not duplication of effort. Also, usually security software also acts as a 'data collector' in that it sends back suspicious files back to the lab for analysis. In this respect, having hundreds of thousands or millions of free users makes it easier to write definitions and protect all of our users because they provide us with more samples than we would of otherwise had access too. We actually ship a better product BECAUSE we have such a large # of users (both free and paying users).
      - whileonebegin 15y ago
        Wasn't this the model for WinZip all those years? Even they found it didn't work in the end and had to change to try-before-you-buy.
      - dean 15y ago
        Good point. I can see how a big user base would help you develop a better product in this industry. Regarding 'cost of free users', I was thinking of support costs. Even though a user does not pay for the product, they still expect to get help when they run into trouble. And if they don't get help, that could wash away some of the goodwill they might otherwise feel. Also, bandwidth costs for downloads.
        jgmmo 15y ago
        You can get around some of the bandwidth costs by doing what AVG and others do, which is bounce 100% of downloads to download sites like CNET so that the downloads count towards bumping you up in their 'top downloads' lists -- which helps you get even more downloads moving forward. Some companies do not offer phone support (especially not to Free users), so this limits free users support down to just tickets and forums (which can be user-moderated to a large degree). Some companies have had success bouncing free users who need support to 3rd party 'PC help' type companies who can work with the person over the phone - for a hefty fee of course, and part of that goes back to the originator as commission.
- neilk 15y ago
  Flickr was profitable even before acquisition with a freemium model. The free version of Flickr is exactly like the paid version except with upload caps per month. Dropbox has a freemium model and is probably profitable or on their way there. One thing both have in common: they are basically giving away disk space. Storage costs are trivial -- we're approaching pennies per GB -- but giving away CPU time or bandwidth is a much riskier proposition.
  - dean 15y ago
    Good examples, but I can't help feeling that there a lot of assumptions about profitability. Dropbox, for example, is a great service, I really like it. Every tech-savvy person I know uses it, but no one I know pays for it. I know this doesn't prove anything, but it makes me wonder if they are making money. Even if disk space is dirt cheap, it's still not free for them. I wonder how many paying users they need to cover the cost of all those free users.
JS_startup 15y ago
There might be a few, but I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one. I'm not saying freemium will never work, but let's face it: it's ubiquity is because it was at one time the flavor of the month startup model that VC money was pouring into, not because it is a superior or effective business model.
- pavel_lishin 15y ago
  > I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one. So the freemium model is like any other small business?
  - andrewflnr 15y ago
    "There might be a few startups that work, but I'd be willing to speculate that there are many more examples where they did not work and the company either went under or had to perform a complete reversal." Not perfect correspondence, but pretty close. :)
- rplnt 15y ago
  There are two things to consider when thinking about freemium. 1. Can you monetize free users with your product? In many cases you can, using ads, affiliate links, search partnership, ... 2. Is it cheap for you to support free users? This have to be compared to conversion rate. If it is really cheap to support free users than you can have bad conversion rate. In some specific cases the freemium model is the only model that works: products where interaction with other users is required for product to be usable. Only example I can think of right now are online games. You need players in order to attract more players, some of which may convert to be paying customers.
bitwize 15y ago
Free to play. Sell hats!
- ConstantineXVI 15y ago
  This particular instance was: * Charge for your game * Build up a loyal fanbase * Continue to provide actual new content for players, for free. * Start selling hats * Stop charging for the game (nearly four years later). I wouldn't necessarily mark up TF2 as a freemium success as it only went to the model fairly late in it's life (after it had already more than made back it's budget, likely).

There are many examples where freemium model works though.

by rplnt 15y ago

There are many examples where freemium model works though.

dean 15y ago

I'm interested to see examples where the freemium model works. Could you provide any links? I've typically read that they don't work. For example: http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-work/ http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-...

jgmmo 15y ago
Just in my industry: AVG, AVAST, AVIRA, BitDefender, MalwareBytes, SUPERAntiSpyware All offer a non-trial/non-expiring 100% free home user version of their security software, with a more feature rich premium option available for payment. Freemium works like gangbusters in some industries.
- dean 15y ago
  It would be interesting to see some numbers though. I wonder what percentage of free users upgrade to a paid version. I wonder what it costs to support the free users. I have to assume it works for them, or they probably wouldn't have lasted as a company. But, speaking anecdotally, I've used several of these products and have never felt the need to upgrade. Also, you could make a case that these are not truly freemium, since any commercial use requires payment.
  - rplnt 15y ago
    AVG went public 2 weeks ago, some info might be available in their SEC filing.
    - yread 15y ago
      AVAST went public in November, too
  - jgmmo 15y ago
    About 1% is a good estimate. At first glance you might think this is bad, but actually -- the freemium model provides boatloads of word of mouth. Even if only 1% buy - a large % of the other 99% are still satisfied and tell people, which throws more folks in the funnel and leaves the company with a large surplus of goodwill. We have people routinely write in to us - 'Ive used your product for years and it's worked so great I just want to help contribute' and so they buy a license - just out of gratitude from years of free service and not because they are looking for any of the Premium features. Regarding the 'cost of free users' - the cost is negligible. It's not like we write different definitions for the premium and the free - they all share the same definitions so there is not duplication of effort. Also, usually security software also acts as a 'data collector' in that it sends back suspicious files back to the lab for analysis. In this respect, having hundreds of thousands or millions of free users makes it easier to write definitions and protect all of our users because they provide us with more samples than we would of otherwise had access too. We actually ship a better product BECAUSE we have such a large # of users (both free and paying users).
    - whileonebegin 15y ago
      Wasn't this the model for WinZip all those years? Even they found it didn't work in the end and had to change to try-before-you-buy.
    - dean 15y ago
      Good point. I can see how a big user base would help you develop a better product in this industry. Regarding 'cost of free users', I was thinking of support costs. Even though a user does not pay for the product, they still expect to get help when they run into trouble. And if they don't get help, that could wash away some of the goodwill they might otherwise feel. Also, bandwidth costs for downloads.
      - jgmmo 15y ago
        You can get around some of the bandwidth costs by doing what AVG and others do, which is bounce 100% of downloads to download sites like CNET so that the downloads count towards bumping you up in their 'top downloads' lists -- which helps you get even more downloads moving forward. Some companies do not offer phone support (especially not to Free users), so this limits free users support down to just tickets and forums (which can be user-moderated to a large degree). Some companies have had success bouncing free users who need support to 3rd party 'PC help' type companies who can work with the person over the phone - for a hefty fee of course, and part of that goes back to the originator as commission.
neilk 15y ago
Flickr was profitable even before acquisition with a freemium model. The free version of Flickr is exactly like the paid version except with upload caps per month. Dropbox has a freemium model and is probably profitable or on their way there. One thing both have in common: they are basically giving away disk space. Storage costs are trivial -- we're approaching pennies per GB -- but giving away CPU time or bandwidth is a much riskier proposition.
- dean 15y ago
  Good examples, but I can't help feeling that there a lot of assumptions about profitability. Dropbox, for example, is a great service, I really like it. Every tech-savvy person I know uses it, but no one I know pays for it. I know this doesn't prove anything, but it makes me wonder if they are making money. Even if disk space is dirt cheap, it's still not free for them. I wonder how many paying users they need to cover the cost of all those free users.

JS_startup 15y ago

There might be a few, but I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one. I'm not saying freemium will never work, but let's face it: it's ubiquity is because it was at one time the flavor of the month startup model that VC money was pouring into, not because it is a superior or effective business model.

pavel_lishin 15y ago
> I'd be willing to speculate that there are many MANY more examples where it did not work and the company either went under or had to perform a complete reversal like this one. So the freemium model is like any other small business?
- andrewflnr 15y ago
  "There might be a few startups that work, but I'd be willing to speculate that there are many more examples where they did not work and the company either went under or had to perform a complete reversal." Not perfect correspondence, but pretty close. :)
rplnt 15y ago
There are two things to consider when thinking about freemium. 1. Can you monetize free users with your product? In many cases you can, using ads, affiliate links, search partnership, ... 2. Is it cheap for you to support free users? This have to be compared to conversion rate. If it is really cheap to support free users than you can have bad conversion rate. In some specific cases the freemium model is the only model that works: products where interaction with other users is required for product to be usable. Only example I can think of right now are online games. You need players in order to attract more players, some of which may convert to be paying customers.

bitwize 15y ago

Free to play. Sell hats!

ConstantineXVI 15y ago
This particular instance was: * Charge for your game * Build up a loyal fanbase * Continue to provide actual new content for players, for free. * Start selling hats * Stop charging for the game (nearly four years later). I wouldn't necessarily mark up TF2 as a freemium success as it only went to the model fairly late in it's life (after it had already more than made back it's budget, likely).