Recently I read an article about freemium and the financial crisis. The main message that the author was trying to get across was that freemium would not survive the current crisis. As he says:
“Freemium was a grand experiment but its practitioners don’t have the luxury of time any more.“
The article implied that you need to first release the free product, and wait for people to start using your product. Then, after a while, you need to release the premium, revenue generating product. Companies would then need outside financing during the period between the releases of the free product and the premium product. Considering the current crisis, it is, and will be, a lot harder to get this outside financing.
However, I don’t think that this waiting period is mandatory, or even necessary. One good example of this is of Nine Inch Nails. The company gave away its latest album away for free, and at the same time made a series of premium products available. One of these was a $300 box set, which sold out within a week and generated revenue of $750,000.
In my opinion, the success of a business in times of crisis will not be decided by whether they use the freemium model or not, but rather by what sort of revenue generating products the company has in its portfolio.
Let me give you an example – An architect might choose to adopt a freemium model. One way of doing this would be to offer his/her plans for free; and earn his/her money as a consultant in the construction. This architect will probably be affected by the crisis because in times of recession there is less construction.
Here, it is to be noted that the reason the architect is affected is not the freemium model per se, but the reduced demand for the revenue generating product. In other words, people would not need a consultant’s services in troubled times as they don’t choose to build in such times in the first place.
I am not on a crusade to defend freemium. Some freemium models will be bad in times of crisis, but that will be because of the decrease in demand for the associated revenue generating product. You need to see what freemium strategy will work in times of crisis.
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