The Freemium Business Model
I wrote a post last weekend called My Favorite Business Model. I posted it earlier today. Here is how I described the business model:
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.
At the end of the post I asked for some suggestions of what I should call this business model. I've gotten 33 comments already which may make this the most commented post I've ever written, surely its the most commented post in the first day I've ever written.
And at the risk of calling the game before it's over, I have to go with Freemium. I love the name, suggested by Jarid Lukin of the Flatiron portfolio company Alacra.
So from here on in, I will refer to this business model as the freemium business model. I hope the name sticks because I love it.
This would probably better labeled as “subsidized”. With this model, you basically give away a free version of your product with the hopes of upgrading some number of these free users to your “premium” version for which you charge something. The idea here is that the cost you incur for supporting the free users is a marketing cost, much like other marketing costs.
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Posted by: shadi | June 20, 2008 at 06:11 AM
Yes its what my site is all about free products and services for business owners
Posted by: freebusinessservices | July 21, 2008 at 01:18 AM
great name for a business model, I've been polishing my business plan for a new site/service and we were struggling with that to call that "free" segment of our offering... excellent idea!
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Posted by: On Your Lot Builder | March 29, 2009 at 07:33 AM
As we are seeing at Vlingo this model is an especially good fit for mobile apps! http://blog.vlingo.com/2009/05/why-freemium.html
Posted by: Hadley Harris | May 21, 2009 at 05:43 PM
hmmm... not a huge fan of this one at first glance...
Posted by: password manager | July 14, 2009 at 02:50 AM
Perhaps I may suggest an alternative 'freemium' spelling; 'phreemium' (with 'ph' as in phone). An improvement? I think so. With 'phreemium', the written word looks at a glance a little more like 'premium' and so it is easier to understand what the 'mium' part relates to (as it is from the Latin: emere "to buy"). So in effect 'freemium' means 'free to buy' which is not the point of the word's invention. The word should say it is partly free and partly at a cost (at a premium) to buy. So the 'mium' part of the word is not at fault, it is the 'free' that does not do the whole job, hence 'phree' tells a story that 'free' does not.
Posted by: Oakwood | July 17, 2009 at 06:28 AM
Oh yeah, this is fantastic, and no worries I think Freemium is here to stay!
Posted by: Nick | May 02, 2010 at 03:05 AM
that's the spirit of the internet everything should be free thats why it grew to what it is today and government is trying to shut down the free part
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