What is Freemium?

Freemium is a relatively recent concept, specifically from 2006. The one in charge of popularizing it was Fred Wilson of Union Square Ventures. The definition of Freemium is the business model that works by providing a service or product for free, such as web services or software, while charging a fee for advanced tools or additional services. This term combines two essential elements of the commercial field such as 'free' (free) and 'premium'.

However, there must be a series of restrictions within the Freemium section:

  • Limited time: can only be used 30 days.
  • Limited capacity: one piece of software can only be used for ten uses.
  • Limited users: only valid for one computer instead of a network.

Although it is not something new, it does begin to have a certain profitability in the business sector. And it is that having a free product manages to attract new users quickly and easily. In addition, the marginal cost of each new customer is very low, and new consumers can be recruited through those who already benefit from these advantages. In freemium models, it is estimated that less than 10% end up buying something.

Características de Freemium

There are a number of aspects that define Fremium:

  • Quantity: if only a very low percentage of users are going to pay for the services (around 1%), then it will be necessary to have a high number of free clients in order to make a profit.
  • Conversion: the aim is to transform free subscribers into premium ones.
  • Added value: additional products and services must be formed that have a value added, where the free client feels the need to acquire them and spend money for it.
  • Low costs: the freemium system can succeed thanks to marginal cost of each additional customer is low.

Examples of Freemium

An example from Freemium can be Linkedin. It offers basic services for free, but for a monthly subscription with extra services you end up charging a certain amount of money. Another case can be Dropbox, which offers free online storage, but to enjoy more space it requires a monthly payment.

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