RIP to the Freemium Model?

by Gigaom

Startups have had success in the past with the freemium business model, but is it time to retire it?

Rags Srinivasan sees growing discontent with freemium and a “return to the roots of marketing” that starts with customer needs and gets “your fair share of the value created.” In this guest post for Gigaom he points to inherent problems with the freemium approach, saying that it wrongly leads “startup founders to focus on the product rather than customer needs.”

As an alternative, Srinivasan presents a model that targets specific customers rather than trying to grab all customers at once and hoping some will choose to pay for the enhanced version. Hope, on its own, is no way to run a business. “Shooting an unlimited number of free bullets and hoping some will hit the target is a shotgun approach to monetization,” Srinivasan writes. And as one CEO told him, “It is time to retire the shotgun.”

Photo by: TimothyJ

  • Freemium was *always” a crappy idea. I cannot stress *always* or “crappy” enough! If you give away the milk, why would you need to buy the cow? This is even more true for software apps where there’s always another startup building the next iteration that’s “just like X, but better” and they’re also using the freemium . It kind of goes along with the “adversiting, of course” model for revenue generation.

    I have to think that freemium was devised by people who either don’t know how or don’t want to actually sell their products. Consequently, no real value is created. A few get lucky, but most of those cows end up going to the slaughter house.