The mythology is that Freemium is just for small Web App startups... tell that to the Billion dollar players adopting this pricing model!
Finally... the first of many updates to the Reality of Freemium in SaaS paper was finished and sent out to the mailing list. I'll be sending out the updates over the next couple of weeks - probably reshaping them based on accumulated feedback. It is not too late to get this update, just sign-up for the mailing list and you'll get a link to download the 5-page PDF. Since you'll be on the list, you'll be sure to get the others in right when they are shipped.
At some point we'll put all of the updates together in a nicely edited PDF for distribution to the masses. That probably won't happen until December or January - which is why you need to be on the mailing list if you want timely access to this information.
The basis for this particular update is not just from reading industry news or seeing presentations. In 2010 Sixteen Ventures has been engaged - unfortunately under tight NDA - with several established SaaS and traditional software companies looking to use Freemium to enter new parts of their existing markets, to enter adjacent markets, or simply to disrupt their free competitors. First hand experience tells us that the number of existing companies leveraging Freemium will go up over the next few years and that startups who think "Free" is their sustainable competitive advantage might be in for a big surprise.
A quick refresher on what Freemium is, at least in B2B SaaS. Freemium is when a vendor offers both a Free-in-Perpetuity (Free-For-Life) version of the product, often feature- or usage-limited, where the user assumes they will use the product forever without being charged anything as well as some other Premium or for-fee product or service for which the free version is a lead-in. This definition is a bit wider than most and takes into account the many types of Freemium (there are 5 and will be covered in another article) and ways it is being leveraged in the market.
The notion of "Classical Freemium" where there is a feature- or usage-limited Free-in-Perpetuity version of a product or service and then a version of the same product or service with less limitations that the vendor will attempt to up-sell the user to is actually on the decline. Aside from the notion of the "Penny Gap" being a very real idea, it is more than that. The concept of "near zero" support costs have been found to be "near untrue," most find it difficult to justify and continue to support a 3-5% conversion rate, and most are realizing what Freemium really is - a marketing tactic and not a business model. Join the mailing list and get the "Freemium is not just for 'Startups with nothing to lose'" for free today.
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