“Freemium” services
A while ago I read an article on the “freemium” business model. The freemium model is when a commercial company allows people to use their products for free, but also offer a premium version for which a few users are persuaded to pay. Apparently, the term “freemium” is generally attributed to Jarid Lukin, an e-commerce marketing executive.
Many of the points raised in the article were very relevant to Internet Marketing, where the current approach is to give away a free ebook and then use the contact details to sell a related product. This works because the internet allows an entrepreneur to enter a market with a free offering because the costs of doing so are relatively low. The article made the very valid point that a company’s interests differ according to its position: charging nothing may well make sense to a start up business but not to an established business. Established businesses tend to have high fixed costs and cannot, therefore, afford to give away content at below marginal cost.
Social media sites were quoted as classic examples of where the freemium model works and also why sometimes it does not. Such sites can provide content for free because it does not cost them anything – it is donated by users. However, for the same reason, any attempt to charge for content may fail because the service could be undercut by a competitor.
The article’s conclusion was that free gets you to a place where you can ask to get paid. If you do not start with free you will never get paid.
I’m not sure that I agree entirely, but I do agree that the internet can give a small business a platform to undermine much bigger ones and that the freemium model is one way to do that.
[...] we decided to think of our site as a power tool itself – a power tool you can use to SAVE MONEY.Freemium services | Clive's Internet Marketing blogA while ago I read an article on the freemium business model. The freemium model is when a [...]