Tag Archives: free

Succeeding With Freemium (Case Studies)

A look at how to succeed with freemium, through a number of case studies:

  • Experiment with different freemium models: When Pandora offered 10 hours of free radio before requiring users to pay an annual subscription, the vast majority of their users left once their allocation of free time expired. The company then experimented with a free, advertising-supported model with a premium option available (that also included a desktop application, higher quality streams and fewer usage limits), and the subscriber conversion rate grew to 1.7% of their 20 million users.
    Automattic doesn’t employ the conventional tiered premium model, but instead offers “a-la-carte freemium services”: premium ‘add-ons’ such as domain mapping. The problem with this, says CEO Toni Schneider, is that it can be difficult to market the distinct services effectively.
  • Discover where your marketing costs should go (where are you acquiring users?): Dropbox started attempting to acquire users through conventional search marketing, the acquisition costs of which were thousands of dollars per customer (for a $100 product). Noticing that user referrals were a big source of growth, the company then changed tactics and started offering an incentive (more storage space) to all existing users for referring friends. Dropbox CEO Drew Houston says that “the big lesson there is if you adopt a freemium business model your marketing cost is the free users” and “search is great for harvesting demand, not creating it”.
  • Focus on deriving maximum value from users: After figuring out the dynamics of their user base (that inactive users drop off over time and active users started paying–there was minimum freeloading), Evernote realised good growth and investment interest. The company’s CEO says freemium can work for any business if you have 1) a great long-term retention rate, 2) a product that increases in value over time and 3) variable costs.
  • Beware and identify/remove abusers: Not (necessarily) freeloaders, but those who use free versions for nefarious means. MailChimp‘s legal costs increased 245 percent after abuse-related issues (spamming, etc.) increased by 354 in the first seven months of moving to a freemium model. They had to develop ways to automate their detection (a waste of resources).

I also like the introduction to this article:

Don’t spend money on marketing, do offer flexibility and data exporting to eliminate buyers’ regret, make sure to capitalize on and value goodwill, and only charge for things that are hard to do. That’s what some startups say is the key to success in the freemium business. But the biggest reason […] Pandora, Dropbox, Evernote, Automattic and MailChimp are doing well is because they have great products that people want. They’ve been able to get those products to a broad audience by using the freemium model — that is, offering a free service with the option to upgrade.

Cory Doctorow’s Experiment: Does Free Work?

For his next collection of short stories to be published, titled With a Little Help, author and blogger-extraordinaire Cory Doctorow will be running an experiment so that he can see whether his strategy of offering his work for free is working.

With prices to range from $0.00 to $10,000 for various packages, Doctorow is to track his financial progress and the progress of the experiment as a whole on his new column at Publishers Weekly.

This first column looks at how he will be making money (his marketing and publicity strategy will be covered soon, too):

  • E-book: free, in a wide variety of formats
  • Audiobook: free, in a wide variety of formats
  • Donations: whatever happens
  • Print-on-Demand trade paperback: $16 (approximately; price TBD)
  • Premium hardcover edition: $250, limited run of 250 copies
  • Commission a new story: $10,000 (one only)
  • Advertisements: TBD
  • Donations of books: TBD

That’s how the money is going to come in. To be honest, I have no idea how much money that will be ($10,000 has already come in, of course). But I do know what I’ll do about it. I’m going to disclose it, all of it, every month, in a running tally in a monthly column here in Publishers Weekly. And incidentally, this article is grossing me all of $900, less my agent’s 15% commission, and the columns $400 hereafter. I will then put this into an appendix, which will be added to new editions of the book and compared to the revenues from Overclocked. That’s as close to an apples-to-apples comparison as I can come up with, but I think it will speak well to the question: what’s the best a writer like me can do on his own, versus with a traditional publisher for whom he does everything he can to aid in book sales?

via Marginal Revolution

Free: Interview with Chris Anderson

Whether you’ve read it or not, you’re undoubtedly aware that Chris Anderson, editor in chief of Wired and author of The Long Tail, has written a new book: Free.

I haven’t read the book but can likely guess the premise—and given that the unabridged audiobook can be downloaded online I’ll no doubt be giving it a listen at some point in the near future (Anderson made Free available online at no cost in various formats for a limited time).

Until that time, this interview about Free between Chris Anderson and Hugh MacLeod (of Gaping Void) will satiate my desire.

I think there are two classes of people who are afraid or skeptical of Free: those who grew up before the web (ie, olds like me) and people whose industries are threatened by the web (ie, media people like me). Many in my generation or profession (mostly, I hope, those who haven’t read the book) assume that Free is something of a Ponzi scheme. Meanwhile, my kids are also appalled that I wrote a book called FREE, but not because it’s wrong/scary, but because it’s so freaking obvious.

Needless to say, they’re both wrong. Free is neither a mirage nor is it self-evident. Instead, it’s an essential, but complicated, component of a 21st century business model—not the only price, but often the best one.

Some other choice quotes from the interview (best read in context):

These are exciting days, and if ever these was a time to be overextended this is it.

Easier: experimenting. Harder: predicting.

Don’t wait to be given a job to do something cool. Follow your passions, create something every day, take chances and try to be the best in the world at something, no matter how tiny and trivial. Nothing impresses me more than initiative. And there has never been a better time to take it.

On a more prosaic note, I think that leading people is perhaps the most important skill these days.

Typography and Design (Two Free Ebooks)

Getting Real is the undisputed bible of agile software development—a manifesto that can change your view in a single reading. However when it comes to typography and design, the closest I have ever come to such a document was Mark Boulton’s Better Typography presentation. Now there’s a contender:

The Vignelli Canon (pdf)

I can’t do this tome justice. Split into two parts—The Intangibles (semantics, syntactics, etc.) and The Tangibles (paper sizes, grids, type sizes, etc.)—Massimo Vignelli’s book covers everything you could want to know about typography in graphic design.

One definitely not to miss.

How Do You Design? (pdf)

Hugh Dubberly’s book looks at “over one-hundred descriptions of design and development processes, from architecture, industrial design, mechanical engineering, quality management, and software development”.

By reading this you can’t fail to learn something about design.