Freemium

Freemium is a business model where the base product is offered for free, while the full product is chargeable.

Origin

Freemium is a word consisting of free (free) and premium. Many Internet companies use freemium as a business model, such as Skype, Flickr, XING, Zynga and Pandora.

The freemium business model has been the commercialization of the Internet in the mid -1990s, a common approach to achieve profits from basically free services available (early international example: Netscape Communications, Germany: Web.de ). For software products, an analog model is even older and is found today very prominent example at Adobe Systems Inc. with the free Acrobat Reader. For easy creation of PDF files from many Windows applications, there were only the paid Adobe Acrobat for a long time.

The venture capitalist Fred Wilson described the freemium model on 23 March 2006 as follows: "Offer your services free to, perhaps, with advertising or maybe not win many customers in an efficient manner through word of mouth, advertising partners, placement in search engines and so on and then offer your customer base at an extra charge added services or an enhanced version of your service. "

After Wilson had described the business model, he asked for suggestions for a name. Within hours, more than 30 names were suggested by his blog readers. The proposal Freemium was finally accepted. Since then, this term appeared in Wired Magazine 2.0 magazine and the business and has been used by bloggers such as Chris Anderson ( editor of Wired ) and Tom Evslin. 2009 Anderson published the book Free, which describes the rising popularity of this business model.

Variants

Basically just need to be distinguished in software products between free and fully functioning software on the one hand and free, but only limited usable software. While users of free software is the full product, including the right to review and change the source code get, they get in software and services for the freemium model only a part of the power spectrum of the product and not comprehensive of rights, eg to modify the source code or even allowed to see.

The differences between free basic version and paid premium version vary by product.

Computer Games

Computer games (especially online games ) are increasingly marketed as a freemium products. Revenues are generated via in-game placed advertising or purchase virtual items within the game.

Application software

• Functions: basic and premium version differ in features. An example is Skype. In the free version, among others, group video calls are not available.
• Capacity: Full functionality is initially available in the basic version. While the use of the use (eg duration, bandwidth, file size) is measured. After reaching the volume limit, the product is only limited use. An example of this is the SQL Server Express. In the freemium version of the database size is limited to 10GB.
• Customer group: Certain groups of customers will be offered the full product for free. An example of this is the DreamSpark Microsoft model. Here students selected software is offered free of charge.

Hardware

Even hardware is marketed with the freemium business model. The provider publishes sheets, schedules and instructions for free, often as a free hardware to create with the aim of an online community, which in turn contributes to improve the product ( crowdsourcing ). Are the necessary attention and a need created based kits or finished products offered by the provider depends. The target group are customers who do not have the time or skill to build the product itself together, but want to own and are willing to pay for it. This business model pursued Chris Anderson and his company DIY Drones and describes it in his book Free.

Books are also available as freemium products. As a basic product, the electronic version is used (Audiobook, E -book, website); the hardback book the premium product Represents the already mentioned book Free by Chris Anderson has been marketed.

Daniel Shiffman published in 2012, The Nature of Code as a bound book. The e-book can be downloaded to an arbitrary price 0-50 $ ( Pay- What-You- Want). The electronic version of HTML, including all example programs are available online for free. Shiffman funded the initial investment 2011 on the crowdsourcing platform Kickstarter.com.

Newspapers

In December 2013, the Federal Association of German Newspaper Publishers ( BDZV) announced that now 70 newspaper titles were established in Germany paid-content models on their websites. 71 percent of the newspapers rely on the freemium version. Here what content the editors decide freely and which will be made ​​available free of charge .. alternative payment models are the Metered Model, in which a certain number of articles per month can be read free of charge. All further releases of contributions are chargeable. In contrast, all items are chargeable with a hard pay barrier.

Importance

In the application software, computer games and smartphone apps Freemium playing a growing role as a business model:

In June 2011, PC World reported that paid anti-virus programs in favor of freemium products or entirely free virus scanners lose market share. That would have meant that today most of the providers offer a Freemiumversion.

Also on the smartphone, this business model is established. In July 2013, the market share of freemium apps in Apple's App Store was 71%.

Criticism

The z.T. painful limitations of the free, but not free software has led to terms such as crippleware, nag or Quängelware or Expireware.

In contrast to software products, where this model due to the usually not sensibly usable software is a negative connotation, Internet services are on the freemium model, SOHO environment often useful applications.