Freemium the 13th

If “we” had to throw away “our” jargon – blogosphere, Web 2.0, social media, and so on – and could keep one term, I would vote to save freemium. I like portmanteau words: wijard = widget + card, freemium = free + premium, etc.

Dries of Drupal, Acquia, and Mollom fame posted earlier today about freemium as used in his projects. His remarks on Mollom are particularly interesting.

We currently have more than 3000 active users that use Mollom for free. Say each user spends on average 15 minutes a week moderating his site’s content and reporting classification errors to Mollom. Mollom learns from this feedback and automatically adjusts its spam filters so that all other Mollom users benefit from it. At a rate of $10 USD/hour, we get $390,000 USD worth of value from free users a year — 3000 users x 15 minutes/week x 52 weeks/year x 10 USD/hour = $390,000 USD/year. If these numbers hold up, the value of a free Mollom user could be estimated at $130 USD/year. And that doesn’t include the marketing value they add.

Meanwhile, Chris of the Long Tail identified four different freemium models. One of these is the “feature limited” model, of which WordPress.com is an example. I pay to make this blog changingway.org (as well as changingway.wordpress.com). By the way, WordPress.com is an example of multiple free business models, not “only” of freemium.

The first comment on Chris’s post is by Ben Watson (no relation). “New platforms are often hard to learn, and you can ease rapid adoption by not putting all the bells and whistles on the free version” is a strong argument in favor of the “feature limited” model.

If there is a black belt in the art of freemium, it is worn by 37signals. Looking at the options for my Backpack account, I see a combination of the “feature limited” and “seat limited” freemium models. For example: my free account allows me 2 users, 5 pages, and no storage; a solo account would cost $7/month and give me 100 pages, a shareable calendar, and some file storage; and so on.

Long live freemium. I like, not only the word, but also what it stands for and what it gives me: good software at no charge; more features, if I am willing to pay; and something interesting to write about.

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