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Is the freemium model sustainable?

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?


7 Replies

Rodrigo Vaca
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Rodrigo Vaca Entrepreneur • Advisor
Product & Marketing
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.
Kevin Carney
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Kevin Carney Entrepreneur
Content Marketing Training and Consulting
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
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Andrea Raimondi Entrepreneur
Computer Software Consultant and Contractor
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
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Arthur Lipper Entrepreneur
Chairman of British Far East Holdings Ltd.
First you must be assured that there is a customer demand for that being developed and perhaps provided.
Christoph Ranaweera
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Christoph Ranaweera Entrepreneur • Advisor
Product Lead
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.
Valeriia Timokhina
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Valeriia Timokhina Entrepreneur
Eastern Peak Software: Custom software development
Freemium isn't old, it's proven monetization model, and it remains actual. As it mentioned above, it also helps to reduce risks with user adoption and doesn't scare off most of your prospective audience.
If we talk about mobile apps, most popular apps are usually freemium. People spend on in-app purchases even more than if they bought a paid version. Take a look at some incredibly popular apps such as Pokemon Go or Angry Birds (Pokemon Go app marketing case study). They were free initially and it brought great revenue to their makers.
By the way, freemium is considered to be best monetization model for Android apps.

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