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Why Freemium Doesn't Work

Posted by ryuzaki0 on from the you-get-what-you-pay-for dept.

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."

2 of 321 comments (clear)

  1. Dropbox shows it can be done by nagarjun · · Score: 5, Informative

    From Forbes magazine's Nov 2011 edition; 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.

  2. Um, actually you are wrong by Anonymous Coward · · 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.