[gertburger]

As I understand the article it suggests that the free side of freemium is feature full enough for almost all users leaving very few users willing to pay. Isn't this then just a case of balancing the features in the free and pay versions so that a larger chunk of users would need a entry level pay version for doing anything beyond the basics?

[potatolicious]

The idea of freemium is to use the free features to hook the users, and then charge them for premium features. The problem with this model is that if your free feature set is too poor, people simply won't get hooked. And if you cover all the "core" features users look for (i.e. get them hooked) people don't want to pay for the premium (lower marginal utility).

[tstegart]

But an economically balanced model might not be palatable to consumers. If you don't make the free side full-featured enough, then people get annoyed and leave. And lets be frank, free users are the majority on most sites. So if your business requires the network effect (ie, any social network, etc) then losing those users makes your product less useful to people on an exponential scale.

The fact is, I don't think its a business model either. Its more like large scale marketing. The real business is the paid model, and offering something for free is merely a way of getting users to come to your site and gives you an opportunity to convert them into paying users. And as a marketing method, its pretty bad for exactly the reasons you mentioned.

[opal]

There is always a competitor willing to give more away for free with the bet that they can make up for it once they control the market.

This is for the WEB though where cost/user is low and cloning a product is easy. Other platforms are vastly different.

[jhancock]

In a time when VC money is scarce, fewer can play the "accumulate users and charge in the unforeseen future when all your competitors have died". In this type of market, freemium is a tough play.

Which is nice. I prefer old-fashioned biz models where you put out a product and quickly find out if people are willing to pay for it.

[opal]

Seeing if people are willing to pay for it is still a great metric. But until (if ever) the advertising bubble actually pops, extremely few web products will be best served by freemium.

I can count web freemiums that made more money than their free counterparts on half a hand.

[tdavidson]

That's how I read the article. The model is sound and has been used outside of the web for years: where we go wrong is how we tactically apply the model.