Why Freemium Doesn't Work 321
itwbennett writes "Tyler Nichols learned an obvious but important lesson with his freemium Letter from Santa site: 'most people who want something for free will never, ever think of paying you, no matter how valuable they find your service.' He also discovered that non-paying customers are more demanding than paying customers, which only stands to reason: If someone likes your service enough to pay for it, they probably have an affinity for your brand and will be kinder."
Dropbox shows it can be done (Score:5, Informative)
From Forbes magazine's Nov 2011 edition [forbes.com]; emphasis mine:
[Dropbox] has solved the “freemium” riddle, with revenue on track to hit $240 million in 2011 despite the fact that 96% of those users pay nothing. With only 70 staffers, mostly engineers, Dropbox grosses nearly three times more per employee than even the darling of business models, Google. [CEO Drew Houston] claims it’s already profitable.
BS (Score:5, Informative)
After reading the article, the only "evidence" that the Freemium model does not work is that free users that got his "thank you" email flagged him spam. I bet he also attempted an upselling on that thank you email. People that get stuff for free tend to be very picky about getting emails even reminding them they can get a paid version.
Anyways, what he described is not even "fremium"; it’s a free edition of the site and a paid edition of the site. Freemium is a model where the product is entirely free and additional gimmicks or features are unlocked by micro-transactions (like 99c for extra Santa card layouts.)
Anyways, non-story, yada yada.
Re:For 1 data point (Score:2, Informative)
It's "wheelbarrow", from "barrow", "a small vehicle used to carry a load and pulled or pushed by hand."
http://en.wiktionary.org/wiki/barrow#Noun_2 [wiktionary.org]
(Barrel / cask / keg / drum / etc is the large cylindrical container for storing beverages, chemicals or, historically, certain foods)
He did it wrong (Score:4, Informative)
Send non-paying customer questions to a queue that you look at "if you feel like it" and give paying customers a different address (or mechanism!) for support, maybe even a unique one so you know if they've given it away. Problem solved! You can glance over the queue to see if there's any improvements you should make, without having to actually respond to any of that email.
Hilariously, ITworld registered me but I still don't know if they took my comment. When a site is even more incompetent than slashdot you wonder WTF.
Re:Free2play in games... (Score:5, Informative)
Anybody notice that WOW is free to play up to level 20 now?
For WOW junkies, level 20 is laughable, but for people who have never played before, do you think 20 levels is enough to get you hooked?
Um, actually you are wrong (Score:5, Informative)
Zynga's revenue for 2011 was roughly 1 billion:
http://blogs.wsj.com/venturecapital/2011/12/15/so-whats-zynga-going-to-do-with-all-its-cash/
EA's revenue for 2010 was roughly 3.65 billion, with roughly 800 million in 'digital revenues':
http://en.wikipedia.org/wiki/Electronic_Arts
So Zynga took in less than 1/3 what EA did this past year, still impressive, but quite far from beating EA so far.
Re:Free2play in games... (Score:5, Informative)
On top of that Valve has had huge success by making Team Fortress 2 free. The best thing about TF2 is that it doesn't even feel like they're trying to cash you. You can get everything in the game, but the game is so good that I have happily spend some cash on the store too. On top of that they have created such a good in-game economy that people are spending time on trading inside it and cashing out. And just to say it again - all of this without making the game worse or anyone feeling like they need to buy something from the store, because you can get everything via game, trading or crafting too. And the vanilla weapons are often better than the unlockable ones!
Actually, F2P users can't get hats unless they're promotional hats they get from purchasing another game. You're also limited to a 50 item inventory (not counting the 27 stock items).
Your inventory will increase to the standard 300 items once you buy a single items from the in-game store. Meaning that buying a $0.49 weapon or $0.99 class starter pack, then spending the other $4.00-$4.50 (Steam Wallet makes you add $5 minimum) on another Steam game.
Note: The amounts are different in other currencies.
Re:Free2play in games... (Score:4, Informative)
And companies like IBM, Google, etc. make billions on the back of open source software. But clearly you're right that this is the exception and can only work in a handful of cases. They must only succeed out of dumb luck, because the model itself can't possibly make any sense. Companies like Google don't know what they're doing.
Google makes its money selling advertising; the software just gets eyeballs to the ads. IBM makes its money selling servers, supercomputers, infrastructure services, microchip designs, etc., not selling software to end users. Do they use open-source software? Sure. But open-source software isn't their product, as such. It's not what people are paying them for.