Freemium: Difference between revisions
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'''Freemium''' is a [[business model]] that works by offering a basic product or service free of charge (such as software, web services or other) while charging a premium for advanced features, functionality, or related products and services. |
'''Freemium''' is a [[business model]] that works by offering a basic product or service free of charge (such as software, web services or other) while charging a premium for advanced features, functionality, or related products and services.<ref>JLM de la Iglesia, JEL Gayo, "''Doing business by selling free services''". Web 2.0: The Business Model, 2008. Springer</ref><ref>Tom Hayes, "''Jump Point: How Network Culture is Revolutionizing Business''". 2008. Page 195.</ref> The word "freemium" is a [[portmanteau]] combining the two aspects of the business model: "free" and "premium". The business model has gained popularity with [[Web 2.0]] and [[open source]] companies.<ref>{{cite news|url=http://money.cnn.com/magazines/business2/business2_archive/2006/10/01/8387115/index.htm|publisher=[[Business 2.0]]|title=A Business Model VCs Love|date=2006-10-01 | first=Katherine | last=Heires}}</ref> |
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== Origin == |
== Origin == |
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Revision as of 04:56, 17 February 2011
Freemium is a business model that works by offering a basic product or service free of charge (such as software, web services or other) while charging a premium for advanced features, functionality, or related products and services.[1][2] The word "freemium" is a portmanteau combining the two aspects of the business model: "free" and "premium". The business model has gained popularity with Web 2.0 and open source companies.[3]
Origin
The freemium business model was articulated by venture capitalist Fred Wilson on 23 March 2006.[4]
"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."
After describing the business model, Wilson asked for suggestions as to what to call it. Within a matter of hours, more than 30 name suggestions were given by his blog readers. One such suggestion came from Jarid Lukin of Alacra, one of Wilson's portfolio companies. Lukin coined the term "freemium,"[5] and Wilson and his audience adopted it for the business model. The term has since appeared in Wired magazine and Business 2.0, and has been used by bloggers such as Chris Anderson and Tom Evslin. In 2009, Anderson published the book Free which examines the increasing popularity of this business model.
Examples
An early example of the freemium model working on the internet was Musicmatch Jukebox, an all-in-one music management tool that was first marketed with a freemium model in 1999. Most users could use the Basic/Free version, but a $19.99 upgrade provided extra features such as supertagging and faster ripping and burning. [6]
According to the New York Times, freemium is becoming the "most popular business model among Web start-ups."[7] Some of the most popular services, such as YouSendIt, Pandora,[8] Flickr, LinkedIn, Spotify and Skype use the freemium model.
Freemium models
As defined by Chris Anderson:[9]
- Feature limited
- Time Limited
- Capacity limited
- Seat limited
- Customer Class Limited
See also
References
- ^ JLM de la Iglesia, JEL Gayo, "Doing business by selling free services". Web 2.0: The Business Model, 2008. Springer
- ^ Tom Hayes, "Jump Point: How Network Culture is Revolutionizing Business". 2008. Page 195.
- ^ Heires, Katherine (2006-10-01). "A Business Model VCs Love". Business 2.0.
- ^ "Fred Wilson's blog, A VC".
- ^ "The A VC comment suggesting "Freemium"".
- ^ Henchel, Douglas. "Musicmatch Jukebox 10.0 Review". Reviews.cnet.com. Retrieved 2010-03-15.
- ^ Ad Revenue on the Web? No Sure Bet
- ^ by MG Siegler on May 19, 2009 (2009-05-19). "The Freemium Model And A Desktop App Get The Thumbs Up With Pandora One". Techcrunch.com. Retrieved 2010-03-15.
{{cite web}}: CS1 maint: numeric names: authors list (link) - ^ Kincaid, Jason (2009-10-24). "Startup School: Wired Editor Chris Anderson On Freemium Business Models". Techcrunch.com. Retrieved 2010-03-15.
External links
- Blogging for Dollars - Wired magazine
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