“I’m Done With the Freemium Business Model”

A frustrated, hands in the air, ‘I give up’ post on the freemium business model by Tyler Nicholas of Letter From Santa:

I am done with “free”. I have come to the realization that most people who want something for free will never, ever think of paying you, no matter how valuable they find your service.

Letter From Santa helps parents create a printable, personalized letter for their children for free. The paid version offers a higher resolution letter, a door hanger, and a personalized envelope. Despite substantial traffic in December – 120,000 unique visitors and 1,000,000 pageviews who altogether made over 50,000 customized letters – revenues were inconsequential. Inconsequential enough to warrant the above post.

So this begs the question: is the freemium business model really not sustainable? Was the promise of ‘Free’ too idealistic to start with, one that relied on the innate goodness of people who’d somehow opt for a slightly better paid version for the sake of that warm feeling in their stomachs?

Perhaps. Perhaps not. The answer is far too complicated to espouse here (and calls for another post altogether), but to brand the entire business model of free as unsustainable is probably to be a little too reactionary. More than a few companies have shown that you can not only be sustainable, but downright bloody profitable with a freemium model (see: WordPress). But that is to say that every business can opt for the same model and see comparable success.

In as few words as possible: freemium works when professional or business interests are at stake. If you use a free app to plan out your day, every day, you are more likely to pony up for the premium version. Similarly, if your blog morphs from a stopover for friends and family into a legitimate media property, you are more likely to pay your blogging platform extra for premium features. To expect that people will pay you because you provided them a free service is to lean a little too much on the charitable goodness of strangers; your service must offer a solution that betters their professional life to make the freemium model sustainable.

Also: internet marketers have long known that free gets no respect. Free copies of eBooks are downloaded by the dozen and dumped in some forgotten catacomb of the computer. This is also the reason why you tend to equate higher price with better food when you scan a restaurant menu: we’ve been trained to believe that if something costs money, it must be worth something.