Jag Venugopal's Blog

August 23, 2012

When does Freemium work?

Filed under: Digital Living — Jag @ 10:50 pm

There’s a good discussion over at the Wall Street Journal on when the freemium business model make sense. I’ll direct you to that article for the details, rather than regurgitate them here.

The authors miss one area where the freemium model does not only work, it is close to essential. If your product depends upon a network of people, and if the value of the product increases with the size of the network, then the freemium model is essential to building the network. Think LinkedIn — no one would be buying their premium subscriptions if LinkedIn locked out the millions of freeloaders. Without the freeloaders, the service would be useless to paying customers. Another example is Facebook — the appeal of the site is that so many billions are on it. If your friends were not on Facebook, you would not be very interested in it. A third, somewhat tangential example is newspapers. Both the New York Times and the Wall Street Journal make a good selection of articles free via google.com. If you were to go to their site directly, you would be walled off. But if you go through google news, you will be able to reach a large fraction of their entire newspaper. Again, the reason is that they need a wider network of eyeballs, this time to bait advertisers.

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