Freemium: one of the single most ridiculous Web 2.0 terms ever.
You may not be familiar with the term freemium, but… you are. The term coined by Web 2.0-er Jarid Lukin, is articulated by a venture capitalist as giving “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.”
Along with a plethora of mobile apps, Skype, Flickr, and Dropbox all operate on a freemium model. And with the success of the freemium model for companies like these, many startups have followed suit.
There’s just one big hurdle to jump.
Skype, Flickr, and Dropbox all offer awesome products. In fact, I am or have been a premium subscriber to each of those services at some point in time. The product rocks. What you get free already has an intrinsic value.
But the issue for so many web startups is that their free sucks. When your free product is worth exactly what your users are paying (pssssst, that’s nothing, worthless, zilch, you suck at life and you should end yourself) why would a user pay more for expanded features? You haven’t proven your worth to them, and the added benefits to subscribing to your Awesomr Pro Premium Plan become nothing more than bullet points on a subscription page.
As a web developer I have sorted through lots and lots of other people’s crappy code. I once paid for a PHP Classifieds Script that was full of invalid markup and a dysfunctional payment module. The solution seemed to be to pay even more for a third-party payment integrator. When I paid it seemed the integrator did not work either and when I emailed the developer I was offered a lame explanation and finger pointing at PayPal. Coincidentally, a disclaimer was placed on this fellows site the next day stating that the module didn’t actually work.
Tonight, I was once again faced with PHP scripts. In the course of hooking up a free add-on module, I realized that the company offering the module had purposely left out some features with the hopes that you would upgrade to a $40 “Gold Package” or spring for a $199 “Developer License”. “Your code is messy and really God awful”, I thought. “Why would I pay you?” So within 15 minutes I had hacked around to reach what the Gold Package would have supposedly given me and 2 hours later I was cleaning up code that I am fairly certain would not have been fixed with the Developer License.
So to all you want to be startup crazies: freemium only works when your free is premium, and not when your premium should be free.