Steven Hodson of WinExtra posted Is Freemium Really the Way to Go to raise questions about the viability of the business model that says, give away things for free with ads, and then charge for premium services. His post gives the history of the “freemium” model, plus examples and quotes from proponents.
Beware of Freemium
Beware “Freemium”. This may be the way to get your startup social site off the ground, Hodson says, but consider the long-term effects:
Will you be alienating those advertisers who feel they are being denied the real target of their ads but are now behind a no advertising wall?
Will you drive away members when you either introduce advertising or introduce new features at a price they feel should have been included for free?
Excellent questions for all those starting social networking sites to consider. What do you think about the Freemium business model?
PS. For a different slant on “Fremium,” read Thomas Freedman’s column, “Bits, Bands and Books.”
He says that “the strategy of giving intellectual property away so that people will buy your paraphernalia won’t work well for everything…” But he concludes that “Bit by bit, everything that can be digitized will be digetized, making intellectual property even easier to copy and even harder to sell for more than a nominal price.”
See more on Social Network Business Models
See also this page of related posts on social network business models.
How to Create a Social Networking Website Series has 18 posts on various aspects of this topic.