Freemium in 2015? Is this still a viable way to go?

Is this still a viable way to model your business launch in 2015 for rapid customer acquisition? My startup has a 3 plan subscription model. It has privacy features, with organizing and a bit of storage features. I’ve been working on it for a bit and now worry that if its free, it might devalue the trust. Also, in not offering a free version, you turn away those without credit cards, lowering your user count and ultimately market share. From lots of research. My perception is investors dont like it. Famous words of Mark Cuban “You live by free. You die by free.” Is that still the case? Whats your take on giving a piece away?

  • It depends entirely on the kind of customers you’re looking for. Freemium and pay-only are both well understood and functional business models, you just have to consider the trade-offs. It’s obviously much easier to get users when you’re giving your product away for free.

    Worrying that giving away parts for free devalues trust is nonsense. People trust their most valuable data to free services all the time. It also doesn’t make sense to give away your product in an attempt to inflate your perceived market share. There’s no point in trying to game your user numbers. Who are you trying to impress? Give away your product for free if you think you can convert the free users to paying customers eventually or if you need the feedback to figure out if you’ve got product-market fit.

    Anyway. It’s much easier to start out with a free plan and to ax it in 6 months than to do it the other way around (people will moan it’s unfair). So if you’re going to do a free plan, have one from day 1.

  • I run a business with freemium model.

    Don’t assume that just by making something free, you will get tons of users. Even in my case, it took 2 years before I had a few thousand active users.

    Then the challenge is to convert fraction of these free users who will pay you $20/mo. I just hit 200 paying customers so now I’m “ramen profitable”…

    If you want to do freemium, here are my observations:

    Feel free to charge a bit more than competition. Most of your paying customers will be converting from free so they won’t be looking and comparing other products to save a few bucks. So don’t charge less than $19/mo.
    Make sure marginal costs of free users are near zero. This is so important, you will hate your users if they cost you money.
    Do not provide one-on-one support to free users. Time is money too.

    If your free version has significant marginal costs or requires one-one-one support, you can’t do freemium.

  • Get people to get pay for your product first. Payment is the best way to actually validate that your solution adds true value to someone.

    Once you can prove that this is happening in a repeatable way, consider using freemium for driving growth.

  • Freemium is still viable, and it will be during at least the next decade. My business is freemium and it’s ok for me. Freemium is just a business model. It can’t apply to all businesses. Nobody will sell cars or houses with a freemium model.

    Most freemium businesses fail, because most new businesses fail. It is not a failure from the freemium model.

    If you want to use a freemium model, you must take care of all parameters. Can you afford free users costs ? Even if they are 99.99% of your users ? Why do you want to have free users ? What is the gain for you ? You must be deeply aware of the reasons why you decide to choose freemium. If it’s just because it’s fashionable, you should probably avoid it.

    If free users cost you nothing, if free users give you something good, and finally if potentially paying users don’t stay free users because the free service is good enough, you can go freemium.

    If free users cost you real money, if free users say your product is a shit everywhere on the internet, and if potentially paying users think the free service is good enough for them, don’t go freemium.

    All of this means you must start with a sophisticated offer. Your MVP can’t be a prototype, or a beta. It must be feature rich both for free and paying users, well designed, and reliable. Otherwise your free users will say it’s BS and you won’t have any paying user. So probably, you will have to start a new MVP but this time with a bad reputation…

    Last but not least, freemium is not a guarantee to have users. Don’t forget it: it is not because something is free that everybody want it. You can be free and have zero user. Zero user is the “normal situation”. You still must enroll each of them even with a freemium model. Freemium will never be an excuse for decent-only product, no marketing, no advertising, no biz dev, no strategy.

  • I think the only one who vas say for sure is the customer you are targeting. But I think you know the answer to that. Why pay for something when you can get it for free.

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