Comments on: Freemium Isn’t A Business Model, It’s A Marketing And Trust Strategy

By: Wallen's

Wallen's — Sun, 19 Oct 2008 10:35:59 +0000

Freemium can be a viable revenue model… sometimes…

Mark Evans wrote a post two days ago claiming that freemium is not a business model. Peter Christensen followed with another post on the topic saying that is not a business model but a marketing strategy. IMHO freemium can be a viable revenue model… …

By: Lurker55

Lurker55 — Sat, 18 Oct 2008 21:05:23 +0000

Peter,

If you ask Google’s CEO, I bet he will agree with you 100%; however, if you ask Google’s founders (when they are alone and without their CEO), I bet they will say that their real customers are their users, without whom Google will have no revenues.

By: trevelyan

trevelyan — Sat, 18 Oct 2008 12:13:30 +0000

Good points Peter. We offer free language learning materials for people interested in learning Chinese at Popup Chinese (http://popupchinese.com) and deal with these questions everyday.

Our approach is -to give away the things that are relatively inexpensive (learning materials) and charge for the things that do not scale (customization, extra CPU time). Word of mouth referrals have a much better conversion rate than Google clickthroughs by the way.

By: Peter

Peter — Fri, 17 Oct 2008 19:45:36 +0000

Ed, You forgot one thing. As great as Google is at search, searchers are not Google’s customers. Advertisers are their customers, and the product they sell is targeted ad space. Which their $4B in revenues for Q3 shows they are NOT giving away for free.

Otherwise you nailed it!

By: Ed

Ed — Fri, 17 Oct 2008 19:36:36 +0000

From what I understand, free product and service offers work for large corporations which use the activity that these free offers generate to supplement and grow their core businesses. The goal is to commoditize products and services that complement yours which increase the demand to both the now-cheaper products and your money-making products.

When a company plays on both sides of the fence though (i.e. develop products to sell AND develop products to commoditize your complements) as Google does, it may give the (wrong) impression that free is the future. Free cannot be the future so long as there is a monetary system and it costs money to buy what you need to survive.

Obviously freemium is not a new concept. It is a derivative of trialware which was a derivative of shareware. It is a marketing tool as you pointed out and may work well if there is good balance between what’s free and what’s paid for. It’s a good way to reduce risk for new customers.