As the name says, Freemium is a combination of Free plus Premium, this method is proven to be successful in both promoting a product as well as obtaining a large user base within a short span of time.
The Freemium Business model
This is a business model is a pricing strategy that offers basic services and features free of cost to all the users but additional services require a subscription to access rich features. This is a very intelligent and effective business model being used by many companies from the last decade resulting in the exponential growth of paid users and a free user base.
Also known as the Business Model of the Internet this is applicable to both online and offline services and products. Although it is now used everywhere it’s origin dates back to the 1980s when many software companies used to offer basic programs and functionalities of software for free and charge only for accessing powerful features of the software program.
Advantages
- Exponential audience growth, people never hesitate to try free products as it literally costs them nothing upfront.
- Intelligent marketing, the product markets itself as users start using it they will be convinced of it’s potential and spread the word.
- Known to work very well with software and digital services.
Disadvantages
- More free-riders (free users) than premium users might affect investment and maintenance of the product in the beginning.
- Features and Capacity should be limited/restricted very carefully considering the competitors and the market value for the service.
Don’t confuse free trial with the freemium, free trial is a model that offers all premium services for a limited amount of time like how Netflix and others offer a 1-month free trial.
Most successful cases
1. Spotify
- Music streaming service
- Whopping $7.4 Billion in revenue
- 136 Million premium subscribers and 286 Million users
2. Candy Crush
- Gaming
- 2.73 Billion downloads
- Crossed $5 Billion lifetime revenue
3. Dropbox
- Cloud File Storage
- 14.3 Million customers
- $1.661 Billion in revenue
4. Clash of Clans
- Gaming
- 621 Million downloads
- $727 Million in revenue
5. MailChimp
- Mailing service
- $700 Million in revenue
- 11 Million active customers & 4 Billion audience
6. Zapier
- Automation
- 100K+ Customers
- $50 Million in revenue
7. Skype
- Video conferencing
- $41 Million in revenue
- 100 Million active users per month.
Conclusion
And many other companies in various fields, I have listed only a few here, Source: Wikipedia / TechCrunch for the year 2019 and Q1 2020.
As a developer I really like this idea of business model, what do you think? Name one freemium app that you use in the comments! also, check out more ideas like this one from Matrixread Blog