[meric]

Recently I needed a good diagram program for my assignment to use on my non-windows box. I found this web app: http://www.gliffy.com/ They had free and paid accounts. If it didn't have free accounts, I wouldn't have been impressed by how well it worked, and I wouldn't have told all my friends and my parents about it. Hmm but I'm not a founder so this is just from a particular free product consumer's point of view.

[Osiris]

I agree; I think the freemium model works well. I have a client-side application that I have in a freemium model. The Free version provides just the basic core functionality. The Pro version adds all kinds of other extras that aren't necessary but add value. I think it's a great way to get market penetration with free word of mouth advertising.