Some of today big companies offer their services for free (Google, Facebook, Twitter, Linkedin, Slideshare, Youtube, etc.). They generate revenue through ads, having a paid version with more features or offering paid add-ons to users of the free product. This is known as freemium.
In order to benefit from offering a free version, your product must benefit from having a huge user base because of at least one of the reasons below:
So before going freemium you need to understand why you are offering a free service. Then you need to figure out…
After you figured out why you intend to offer to free service, you need to know how to generate some revenue because offering a free product will cost you money. All of the companies cited here had to figure out how to make money from their huge user bases. Here are some ways they used to generate their revenue:
Tip: If you decide to go freemium, don’t forget that you can only offer a free product if your marginal cost of adding another user to the product user base is as close to zero as possible, otherwise it won’t be a sustainable product and your urge for revenue may kill your freemium product.
Freemium is a viable business model but before offering a freemium product, you need to figure out: