Startups · Disruptive technology

Is the freemium model sustainable?

Himanshu Agrawal Marketing | Business Management | Customer Life Value Management | Business Analytic | Speaker

September 26th, 2016

I would say this was very much the old model where you would build the product first, gain user traction and then think about monetizing. Is this model sustainable?

Rodrigo Vaca Product & Marketing

September 26th, 2016

Freemium is not a business "model". It is a marketing acquisition channel.
As for the second part of your question: "then think about monetizing". I'd say you need to think about monetization from day 1, even if the basis assumptions are yet to be proved.

Christoph Ranaweera validate early, pivot and kill fast instead of feeding a zombie

September 26th, 2016

that's not freemium that's late monetization.
Freemium means you have a product which users get for free but you charge then for parts of the application (premium account at linkedin for example)

When you first do the product and at some point later you do the monetization this is risky. You can do it initially for free but you should have an approach how you want to monetize. As well not to give too much for free initially and ruin your monetization approach.

Facebook is a good example where it worked, Twitter one where it did not so far.
Wikipedia is one where it won't work coz they build up a social oriented community which in the end does not allow for monetisation.

Additionally investors will be difficult to convince when you argue with user growth only, that was different ten years ago.

Kevin Carney Content Marketing works, but needs better tools.

September 26th, 2016

Perhaps the key is to look at companies who do it successfully. Dropbox and Evernote come immediately to mind. What do they do different from companies that don't succeeded with a freemium model?

Andrea Raimondi Computer Software Consultant and Contractor

September 26th, 2016

Freemium works about as well as how much thought you put into it.
The main issue with freemium is sizing things right. 
You could be better served by segmenting customers in other ways. 

Arthur Lipper Chairman of British Far East Holdings Ltd.

September 26th, 2016

First you must be assured that there is a customer demand for that being developed and perhaps provided.

Richard Gilbert Director, SME Partnerships & Business Development, North America at Payoneer

September 26th, 2016

These are all excellent answers and I would agree.  A freemium model can work if you have some sort of a sustainable and scalable business model on the back end.  Some of the examples above cite using the freemium tactic in order to monetize on the back end.  This can work if you have a scalable and enduring ad model on the back end.  Twitter, Facebook and Google are all well known examples of Freemiums with a backend revenue model that you can argue have worked to varying degrees of success.

Pete Tchirkov Working at Thunderrise

February 6th, 2017

Although freemium is the most popular way of monetization, it's not the only one. Check it out