Technology

A Quick Look At Freemium

If there is one thing every consumer will fall for, it is getting something for free. The rise of software as a product has brought some interesting changes to how goods are exchanged, as it is the first kind of product with virtually no productions cost. On top of that, the advent of the internet has made distribution costs almost nil as well. This combined with our rabid need to get things for free has led to the rise of the “freemium” model in software distribution.

The freemium model initially sounds too good to be true; companies don’t just give things out for free without a reason. And the reasoning is sound. Software costs next to nothing to produce and spread after the initial design. All you have to do is copy the file and upload it to the internet. The best kind of advertising is a demonstration, and freemium models are more or less advertising strategies. You are offering functional demonstrations to as many people as possible, and expanding your paying userbase for very little cost.

Many programs today offer freemium models, and they tend to lead to great success stories. Riot Games and their flagship freemium title League of Legends has been the number one played online game in the world for some time now, logging an average of 12 million players a day in 2012 compared to not even a million for most triple A titles. Keith Krach and Docusign hit the ground running and continues to do so well into 2013. It is reported that Docusign is in use by around 90% of Fortune 500 companies and the firm estimates around 25 million unique users. Drew Houston and Dropbox have received myriad awards and been featured in many big name publications. Dropbox was estimated to be worth roughly $4 billion earlier this year. Houston is a regular at tech conventions and has given a commencement speech at MIT at the budding age of 30.

Freemium continues to become more popular and ultimately offers both the consumer and the producer a significant amount of flexibility. With the strategy itself proven, the focus becomes offering enough freebies to entice your future user base without convincing them that they can do without a paid version entirely.

You can look over an additional article analyzing the ups and downs of the freemium model here.

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