As
Ning announced their decision to begin charging for use of their robust network building platform, a thought struck me -
is this the beginning of the end for the Freemium model?
I first learned of the Freemium concept in relation to sites like Last.FM and Flickr when I read Chris Anderson's 2008 article in Wired,
Free! Why $0.00 Is The Future of Business. In it, Anderson essentially explains the realities of a web economy where the technology costs to offer a service to users is so low that it can (and should) be offered for free.
The concept dates back to the early days of Gillette, when King Gillette gave away his razor to sell the disposable blades. Today, the Freemium model is more popular then ever, and is responsible for keeping many web based businesses afloat.
But might those days be coming to an end?
Ning, a popular web-based platform for building community websites had told users for years that it was determined to keep its most basic services free.
That came to an abrupt halt when founder Marc Andreessen
announced that Ning would begin charging all users for using its services.
The decision by Ning seems to follow a similar trend in which companies who had primarily made their living off a Freemium or advertising supported model are finding it increasingly difficult to succeed.
Look no further then one of the most popular web-based music streaming services, Pandora. In a similar move last year, they
placed a 40 hour monthly cap on free listening before a user had to step up to the paid version.
Resetting Expectations
Today's web users, more then ever, expect services to be offered for free and there are plenty of companies who are happy to fulfill that request. The combination of these two factors means it's harder then ever to get a large enough base of paying users to support the growing number of users who want products and services for free.
Companies who decide to adopt the Freemium model need to be good at setting user expectations. This is why companies like Flickr,
Dropbox, and Pandora - who all incorporate the Freemium model to some degree, seem to also be mostly profitable. They all have hard usage caps defined for their users. It's known that once you cross a certain line, you'll have to start paying for use.
What's Next?
Much like we pull from multiple tactics to create successful Internet marketing campaigns, smart start-ups will need to pull ideas from multiple business models to succeed. The Freemium may support the bulk of your business, but you better be exploring advertising opportunities, data licensing, strategic partnerships, and more.
Do you think the Freemium is on the decline, or is it simply evolving?
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