Comments on: Freemium - Shmeemium

By: David Semeria

David Semeria — Sun, 28 Feb 2010 08:47:31 +0000

Thanks for your comment Kirk.

My point is very straightforward: you can charge 3% of your active client base $10/month, or you can charge 100% of them on average 30¢/month. The underlying economics of the business remain unchanged, with users still being able to try the product for free (up to a certain level of usage).

My subsequent post Kamikaze Marketing goes into a bit more detail on how the benefits of the free part of freemium can still be had without incurring the burden of subscriptions.

By: KirkWard

KirkWard — Fri, 26 Feb 2010 19:29:27 +0000

I disagree with your point that the price of the premium service has to be set artificially high. The cost of acquiring the free subscriber and enticing them to stay subscribed is the same cost any marketer would have in building a list. Cost of acquisition plus cost of maintenance. You point that freemium is a marketing model is most apt.

By: David Semeria

David Semeria — Wed, 03 Feb 2010 13:52:51 +0000

Thanks very much Tom!

Sure, as I mentioned above, it's a self-fulfilling prophecy. Generally roll-outs like this can work when users perceive genuine value and so are more willing overcome their unwillingness to change habits.

It's happened many times before. Off the top of my head, I might suggest when Excel came from nowhere and caused Lotus 123 users to change their behaviour. They only did this because the benefits of using Excel far outweighed the burden of its learning curve.

The switch to micro-billing involves significantly less pain (if any). The key is that people should really value the benefits.

By: tom piamenta

tom piamenta — Tue, 02 Feb 2010 12:33:09 +0000

Very interesting!
If microbilling reaches critical mass a snow ball effect can follow, but “educating” the market, to gain this mass, could be quite … well, impossible?
thanks for a great post!

By: Tab Sweep — the Web | dv8-designs

Tab Sweep — the Web | dv8-designs — Wed, 29 Jul 2009 07:40:56 +0000

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By: Tab Sweep — the Web | Design Website Easy

Tab Sweep — the Web | Design Website Easy — Wed, 29 Jul 2009 07:20:37 +0000

By: David Semeria

David Semeria — Mon, 13 Jul 2009 16:01:20 +0000

Hi Andrew, I would have been quite happy to carry on this discussion over at your blog. Nevertheless, since we're here...

You're right that usage-billing is less appealing for storage. But this applies just as much in the real world. I had to pay a guy for five years to store a kart I never used - but we had an agreement and business is business. Amazon S3 also works along similar lines - however I would say it's not a subscription. You pay for what you use, not a flat rate.

The whole point about micro-billing is that everything is a service. It's clear Phanfare is not just a big disk drive in the sky. Sure, storage is a part of the service, but there is a lot of value-added around that.

By asking people to only pay for the what they use, and allowing the payments to trend to zero as usage falls off, you create a lower hurdle for sign-up. And when there are no free users, it means that the average price for everyone can be lower.

By: erlichson

erlichson — Mon, 13 Jul 2009 11:49:29 +0000

Micropayments hardly solves the problem for a photo and video sharing service. Even if you never come back again, we would still need to store your stuff. basically, we would need to charge you a usage fee each month, and that is called a subscription. hence, you are back to square one.

as the point point of the paid users subsidizing the free ones, this is true. If the substitute is to advertise, then that too would need to be paid for by the paying customers. The difference is that a free level of service cannibalizes your paying business, while advertising does not. If i can fill up on the free samples, I don't need to buy dinner.

By: Kamikaze Marketing — LM Framework

Kamikaze Marketing — LM Framework — Sat, 04 Jul 2009 22:19:09 +0000

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By: Alper Çu?un

Alper Çu?un — Mon, 22 Jun 2009 08:36:00 +0000

If anybody is interested in working with us, we at Tipit http://tipit.to would be willing to try this out. We have most of the infrastructure in play and it looks it has a lot of alignment with our concept.