Developer declares 'I am done with the Freemium Business Model'

By , ITworld |  Cloud Computing, freemium, startups

Free

flickr/khawkins04

The startup playbook says you should offer products free and hope a small percentage become paying customers. Tyler Nichols says that doesn't work.

In his Weblog, Nichols recounts his experience with his Letter from Santa site. Over 120,000 unique visitors created 50,000 plus free letters to kids. Paying customers received a higher resolution letter, a personalized envelope, and a door hanger for a price which can't be found on the site since it's past the season. Nichols put up a complete FAQ to answer questions.

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Results? Nichols found free customers are higher maintenance and more demanding than the paying customers. 20 or so paying customers asked questions while "hundreds" of free ones did. And when following up, paying customers never flagged his emails as spam, while many free customers did, and complained. Nichols finishes by planning to do away with the free model and focus on paying customers only.

Freemium sucks

The values in the freemium model has depreciated.
d_rwin on news.ycombinator.com

If a site has a free plan, try it. If I have to upgrade to a paid plan to do something I need to, find another competitor with a better free plan, or adjust how I’m using it to stay with the free plan.
Jeff Schmitz on tylernichols.com

The percentage of users that convert should be a closely watched metric that is very important to any freemium business.
blantoni on news.ycombinator.com

You don't understand

What matters is the total number of people paying you, not what percentage of your users that fraction represents.
pg on news.ycombinator.com

Just my 2 cents, but I think your site could actually work well for freemium if you change your strategy slightly. Easter bunny could be a good lab-rat for next years santa rush.
Robin on tylernichols.com

But yes, the free model can succeed largely with services that offer some enterprise grade solutions. It can work for WordPress because millions of professional bloggers use the platform. It can’t be quite as useful for Christmas Santa app.
Puranjay on startupdispatch.com

Don’t give up. Try another risk reversal strategy instead of freemium – eg. 30 day money back guarantee.
Paul on tylernichols.com

Users don't understand

I too have found huge problems with those using aol.com simply clicking “Spam” to clear out their mailbox.
Brandon on tylernichols.com

There's a lot of money to be made in freemium, but you can't approach it so recklessly.
Shenglong on news.ycombinator.com

If you still follow the freemium model, what percentage of paying customers do you need to make a profit?

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