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Freemium
Freemium is a business model that works by offering a product or service free of charge (typically digital offerings such as software, content, games, 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".
Origin
The business model has probably been in use for software since the 1980s, particularly in the form of a free time- or feature-limited lite version, often given away on a floppy disk or CD-ROM, to promote a paid-for full version. The model is particularly suited to software as the manufacturing cost is negligible, so – as long as significant cannibalization is avoided; little is lost by giving it away for free.
However, this term for the model appears to have been created only much later, in response to a 2006 blog post by venture capitalist Fred Wilson summarizing the model:[3]
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, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.
Jarid Lukin of Alacrathen suggested the term "freemium" for this model.[4]
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.
- ↑ "Fred Wilson's blog, A VC". http://avc.blogs.com/a_vc/2006/03/my_favorite_bus.html.
- ↑ "The A VC comment suggesting "Freemium"". http://www.avc.com/a_vc/2006/03/my_favorite_bus.html#c15324948.
