I was recently talking to a CEO about whether to add a freemium option to her paid subscription offering. The business seemed to be attracting a lot of users willing to pay, but there was a perception that many more peopled would be interested in a free offering–and that Freemium should be incorporated, because so many good consumer subscription busineses seem to have a Freemium subscription.
But sometimes it doesn't make sense to incorporate Freemium at all. There are really 3 good reasons to employ freemium in a business model:
1. Freemium subscribers upgrade to paid (e.g. Dropbox)
2. Freemium subscribers build networked effect which makes paid subscription relevant (e.g. LinkedIn)
3. Freemium subscribers build viral effect by touching potential paying subscribers (e.g. SurveyMonkey or Hightail)
Unfortunately, too many companies incorporate Freemium without regard for fit. And many VCs (especially those who invest primarily in consumer digital businesses) insist on Freemium in the models of the companies they fund.
