What is Freemium ?

The word freemium is a combination of the words free and premium.


It describes a business model in which you give a core product away for free to a large group of users and sell premium products to a smaller fraction of this user base.

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Freemium is not....

…. the same as a free trail

A common misconception is that freemium includes or consists of a free trial period though this is not the case. The difference is that a free trial allows a user to test a product or service for a limited time before buying the actual product.
A freemium model on the other hand provides a product or service that is always free and the premium part comes from offering the free platform of users additional products or services that for a fee can expand or improve their experience. So just because a free product appears in a business model does not make it freemium.

…. the only form of free

Another common misconception is that all business models that involve the use of free products
are freemium models.
There are three other business models centered on a free product, which are commonly used;

  1. Direct cross-subsidy,
  2. Ad-supported
  3. Gift economy.

If you are not using free, you will be competing with free

Freemium business models play a key role in business today. They are widely use in a range of industries. An example of this is that apps with freemium models account for 98% of the revenue in googles app store and 95 % in apples app store.

While this disruptive model was initially only used within the software industry, this is no longer the case. Newspapers, music, publishing, telco, education and a range of other industries are now facing competition from freemium business models.

The underlaying concept that makes this development possible is digital production. The fact that it is now possible to produce and distribute a wide variety of value propositions using computers and the internet. Because of the ever decreasing cost of computer power, storage and internet bandwidth, the marginal cost of distributing this value is virtually zero.

Once a musician has produced an album, it costs him practically the same to have 10 people or 1 million download the album.

This creates a situation where you can give away the core product for free and create a profitable business model from just up-selling to a few percent.

This trend will only continue, as costs continue to decline and an ever increasing array of value propositions can be delivered through the internet. Meaning that across a wide range of industries;

– If you are not using free, you will be competing with free –

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