Last Monday I was in NYC for the Freemium Summit. Attendance was smaller than expected given how widespread this business model is, but it was high quality. Kudos to Charles Hudson for pulling it together.
For those of you interested in freemium, my notes from the event are below.
Marketing must come from word of mouth (not exclusively, but if you don’t have this, then you likely don’t have a high potential freemium app).
Virality must be baked into the product experience
Heavily weight towards support staff. Ensure that staff cost is included in CLTV.
Freemium and SaaS are not the same. Don’t apply the same rules. In particular SaaS LTVs are more fixed.
Freemium at Google:
– Disrupted a large mature market
– They know how to monetize ads – additional revenue
Multiple up and cross sell opportunities
Abandoned freemium. Why? 80% of traffic was on paid accounts. Free and paid had very different needs. 15k paid on 1m accounts. Now at 70k paid.
If you sell ads you will spend a lot of time and effort on security. Also need massive volume or differentiated audience. Ning has 74m uniques. Not enough even for them. Don’t consider ads as an offset for a free service.
In Ning’s case free did not enhance their positioning.
Charge for things that cost money.
Don’t charge for the thing that brings you new users. Don’t limit # of people that can connect to a free account. This is important. Think of Slideshare as an example. You might be inclined to limit the # of presentations for a free user, but more content = more visitors and more revenue potential. Free users generate revenue.
Slideshare used to charge per lead delivered. Stressed out their customers. Making a buy decision each time.
Freemium = large customer base = Small Business Market. Serving SMB requires simple solution.
Bundles increase perceived value. Gives options and more reasons to convert. Same psychology as a buffet.
Test pricing with coupons. Start high.
Put premium features in the free product so that users know they exist and click to upgrade. For these calls to action keep it simple. Don’t show them all your pricing plans. Slideshare does this well.
Churn kills. Measure your cohorts. Do a cron Job to capture each users paid status each day
Feature your premium users. Flattery works.
Communicate well in advance when you plan to charge.
Hootsuite does not try to monetize mobile. Figure that traffic ultimately drives paid web users.
– North America is 15% of the global Internet population.
– 1/2 of google’s revenue is international.
– Surveymonkey got good response to localization and charging in local currency
It’s all about data: architect for and invest in that from the beginning.
Get Satisfaction: make support public. Bake it into the product. Mint.com had a 75% reduction in support tickets when they implemented GS.
User reviews are the new sales cycle.
Businesses are wary of unpublished business models. They worry that you will market to their customers.
Platform customers will pay for value propositions that are similar to the platform’s own value.