Freemium business model is and will be the solution to problems of website monetization

in Entrepreneurship Tech News by Francis Simisim — July 23, 2009 at 12:00 PM |

I’ve been following a lot about different ways on how to monetize web 2.0 websites, and looking at some of the successful monetization of startups is using the freemium business model. What it is is that it gives a free ‘limited’ service to all users and if you’d like more then you have to pay for it. What’s interesting is…

… the debate that it started with Mark Cuban saying that free services are bound to die one day (“When you succeed in free, you’re going to die by free”). And a reply post on a guest post by owner of Box.net on TechCrunch has mentioned that they agree to a certain extent, but says that real business model lies in freemium. I have to agree to both posts, they have their own valid points, but I agree more to what TechCrunch has posted in this topic.These are the reasons why Freemium business model, I believe, is the key to monetization:

Try before you buy

“Imagine… free taste in a supermarket…”

As the famous line goes, ‘Put your money where your mouth is’, if a company is so sure and proud about their product they have to be able to show users its power and usage. Why this is great is that, you can prove your products to consumers first and show that they really need it. I think it’s the best sales strategy that is being implemented in other industries like in food where free samples are given. It’s worked for other industries, so why not online…

Free Marketing

– The best things in life are free? –

You could try advertising and promoting about your expensive product that nobody knows or even care about your existence and once they visit and find the product and price what happens? They leave and never come back (well, unless they really need it). So getting users to try and see the benefits of your website will make them tell other friends, as well as, probably tagging your brand in their work. I was so happy about Animoto’s service, I’ve referred so many friends of mine to try out animoto, without animoto paying me anything or advertising on my end. The videos are all tagged with the Animoto brand which I use for some of my videos. Before you know it, happy users are spreading the word about your product or service.

Sell to those who need more

– They’re bound to reach the limit at some point, if they love your product / service –

With Free marketing up your sleeve, you could then sell to those who need more (the ones who exceed the limits. These are great for corporates and other individuals who has the needs for it. What’s great is that the users believe in your product and they think its great value for money. The best thing about it is that it creates trust between you and your clients that they’re willing to pay for your excellent product or service. The key here is to create dependency and need for them to use more of your service.

Bringing out the best of Products and Services

– It’s all about the innovations –

Users are going to appreciate one product or service over the other for their innovations and will push, us, developers to create the best that we can do. It is beneficial to clients as they get value for money, as well as, advanced features that they can try or buy. And to developers, the playing field becomes more competitive as initial pricing is free therefore it’s not about price wars but is all about your products and services. This will be questions like, who’s got the more user friendly design? Who’s got the better functions? Who’s more reliable? etc.

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Tags: Entrepreneurship News