A freemium cookbook for your company

On July 18, 2009, in Business, by lor3nzo


Business models are a tricky subject. There is an old saying among entrepreneurs that there is no real value to writing down your business model, as it will have changed by the time you commit it to paper. The joke has truth to it; I can personally attest to its veracity. But there is something brewing in the larger world of Internet business models that has wide implications: freemium.

Fred Wilson, famed VC and blogger, originally came up with the general concept of freemium, which he explained this way:

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, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.

This concept, building an audience, then implementing paid features as later expansions, is slowly becoming the de facto model for online companies. Of course, there are many successful Internet companies today that avoid it entirely. However, they all seem to lose money. Digg, Twitter, and the other media darlings of the Web 2.0 world still live in red ink, even after scaling to mass market size.

This has direct implications for companies today that are migrating parts of their entire business to the Internet. To modify the colloquialism of the Internet that “traffic is the new revenue,” the road to profitability seems instead to be “revenue is the new revenue.” Or, as David Hansson put it delicately to people working on the Internet, “Charge a price!” (Read more at: Building43.com)


{Photography by Foooooey}

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