FREEMIUMS

The idea of FREMIUM BUSINESS MODELS is to provide basic services for free and charge for advanced or high quality options. The freemium business model was first articulated by venture capitalist Fred Wilson in 2006 (Source: wikipedia.org)

http://en.wikipedia.org/wiki/Freeemium

Here are the comments of Fred Wilson on freemium business model:

http://avc.blogs.com/a_vc/2006/03/my_favorite_bus.html

The conception is mainly applied for online services, as entertainment, web services and applications, publishing and editorial information etc.

Here are the reflections on free music business model:
http://avc.blog.com/a_vc/2007/06/the_free_music_.html

Another option for free services:
Some other companies could be mentioned in discussion of Freemiums: thier business models envisage free services but other revenue sources as payment for product.
Google provides incredibly powerful search engine for free and get paid by advertisers.
Flickr - huge photos’ data base providing photos for free during one day.

Companies using FREMIUM business model:
Skype is the most well known example of freemium: basic computers interconnection is free, other types of communication are charged. (www.skype.com)
SixApart provides with its basic blogging LiveJournal platform for free and charge for premium version an annual subscription. (www.livejournal.com)
Last.fm - free internet radio and music community portal; premium acounts are charged. (www.last.fm)
Nuvvo – branch of boiling and heating systems company, established e-learning courses for their products: up to 10 pupils and 25 mbytes are free, then – different charge options.
Stardoll – a digital doll creator and on line community for pre-teens;
MySQL – open source database soft wear;
Great number of research and editorial sites provides basic information and articles for free and detailed investigations and reports for subscription fees.
Beautiful examples are Mc Kinsey (www.mckinsey.com) and Business week review (www.businessweek.com).

Freemium advantages:
- Business model allows easily test and validate a product or service;
- Easy to introduce a product, once it has taken its niche, it is difficult to displace it;
- Encourages rapid adoption of a product or services for hesitating clients;
- At free basic products - no competition in pricing policies

Freemium disadvantages:
- The goal to convert a user from free user to paid subscriptions is hard to achieve;
- Impossible to move free features away, users will never accept that;
- Free and charged services should be balanced; clearly identify revenue sources to make profits