Free is not a business model

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Putting mium in free-mium

Hi Phil,

Excellent post. I share your shock about people's mis-characterization of the importance of "free," particularly in SaaS business models.

One minor comment on freemium models. As I talk to "Web 3.0" (as you call it) entrepreneurs, I realize that the issue isn't that they haven't thought of the possible revenue streams (freemium, advertising, subscription, etc.) The challenge is that many haven't put in the hard analysis to figure out which model would logically get the company to profitability and how - e.g.,:
* What is the up-sell from free that freemium clients will pay for? What would people pay in the premium service? What would your upsell rate be?
* What is the demographic or other targeting that would cause advertisers to pay a premium for what you do? How much would it be?

These questions are impossible to answer in advance but they are still critical to ponder because they help you model scenarios (e.g., if we only are going to get a $0.10 CPM on our traffic, we'd better be pretty huge!)

Nick

Posted by: nrmehta   Posted on: 07/06/09 You are currently: a Guest | Members login | Terms of Use

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