Why the Freemium Business Model Isn't What It Used To Be

mattydread23 writes: A few years ago, every enterprise software company was trying freemium — the idea of giving a product away to build users, then charging for additional features. Now, that model seems to be losing favor, except with open source software. Business Insider talks to enterprise founders and VCs to figure out why 'freemium' wasn't all it was cracked up to be.

Comments

B2B only

[phantomfive]

Note that the article is only talking about business software......we will still be harangued with free-to-play games for a while, I think.

Re:B2B only

[Travis Mansbridge]

Microtransaction based games have a fundamental problem and that is that rather than being primarily designed to be fun, they are instead primarily designed to be addictive and to drive the user toward making microtransactions in order to maintain the play that they've become addicted to. However, games that offer mostly cosmetic microtransactions that don't offer a substantial in-game advantage usually manage to avoid this problem.

Re:B2B only

[Anonymous Coward]

They are also designed to be frustrating, otherwise you'd just play the game and leave it at that. It needs to annoy the shit out of you so that parting with money is preferable to playing yet more of the game.

You have to believe that paying will get you past the annoyance and to the next intriguing thing.

Or you could just move to the next one,which will be pretty much the same thing: intriguing opening to get you hooked, then annoying grind to may you pay to the next intriguing stage.

Because after paying to skip one grind, they have to make more grind to get you to pay again.

Re:B2B only

[RogueyWon]

To some extent, yes. But I think the worst of the big "rush to freemium" might have passed now. Certainly, traditional gaming companies like EA and Crytek who invested heavily in the model have found the results from it disappointing. Meanwhile, the mobile gaming companies like King who made it big on the back of mobile mega-hits have found it difficult to replicate the success of their big-name games and are generally downsizing.

There are parts of the industry where freemium is working; League of Legends, which has a particularly benign version of the model, is a huge success and will remain so for the foreseeable future. A few failing MMOs, such as Lord of the Rings Online and Star Wars: The Old Republic have managed to extend their lives by moving partially or fully to a freemium model. But in general, the pendulum in most of the gaming world seems to be swinging away from freemium right now (though sadly, buy-to-own games with pay-to-win elements like Forza 5 don't seem to be going away). The mobile gaming ecosystems are not in a happy place due to over-saturation of the markets and low standards, which console and PC gamers have gotten a bit savvier over the last couple of years and have generally realised that there is no such thing as a free lunch.

The exceptions to all of this are in Asia. Much of Japan's gaming industry is rapidly decoupling from the wider global industry (Sony, Nintendo and, to a lesser extent, Square-Enix being the exceptions). But the only forms of gaming in good health at the moment are childrens' games (primarily buy-to-own and on handheld platforms), otaku games (some freemium, some buy-to-own-but-pay-to-win on home console and handheld platforms) and salaryman/woman-focussed pay-to-win mobile games, designed to be played in short bursts on a commute. The commute is, unfortunately, more or less the only time that a Japanese adult with a full time job has for gaming, given their ridiculous working hours culture, so the freemium model sits more naturally there.

China's the other exception. There's simply less stigma there about buying your way to success and the majority of their online games in particular are explicitly built around the fact that whoever spends the most on in-game items will have a huge advantage in the game. Everybody there seems to be ok with that (likely for a massively complicated web of social and cultural factors), but it makes my blood run cold.

Re:B2B only

[Dutch Gun]

If you think about it, ALL games are designed to be addictive. The sort of pleasure/reward sensations are really no different between paid, free, free-to-play, buy-to-play, or any other variation. Instead, what's different is that the microtransaction based free-to-play games purposefully slow down the effort/reward ratio over time, and force the player to either slog through longer hours of gameplay with fewer rewards per hour spent, with the temptation of being able to increase that ratio with real money.

Every game has to carefully balance that effort/reward ratio. Too much effort required, and the game feels like a grind. Too much reward too quickly, and there's no sense of accomplishment, or the game simply runs out of content for the player. The problem is that the microtransaction model encourages developers to negatively impact these core game mechanics. Many players also dislike the immersion-breaking aspect of a game asking for more money during gameplay. Unfortunately, it's also proven to be a rather popular model, because it's a great way to get players hooked without the initial barrier of a financial commitment.

Personally, I feel the nastiest side of microtransaction games is that these types of games also benefit greatly from addictive/obsessive personalities, with some players spending obscene amounts of money on in-game perks (this was according to the CEO of a company I used to work for). This is great for a company's bottom line, but I don't care much for that aspect of microtransaction based games at all.

Re:B2B only

[Anonymous Coward]

Microtransaction based games have a fundamental problem and that is that rather than being primarily designed to be fun, they are instead primarily designed to be addictive and to drive the user toward making microtransactions in order to maintain the play that they've become addicted to. However, games that offer mostly cosmetic microtransactions that don't offer a substantial in-game advantage usually manage to avoid this problem.

And Coin-op machines don't? This is the business model of Gaming arcades brought into the 21st Century.

Re:B2B only

[Anonymous Coward]

It was possible to beat coin-op arcade games on a single quarter. You can't do that with the new pay-to-win model.

Re:B2B only

[Half-pint HAL]

If you think about it, ALL games are designed to be addictive. The sort of pleasure/reward sensations are really no different between paid, free, free-to-play, buy-to-play, or any other variation. Instead, what's different is that the microtransaction based free-to-play games purposefully slow down the effort/reward ratio over time, and force the player to either slog through longer hours of gameplay with fewer rewards per hour spent, with the temptation of being able to increase that ratio with real money.

There is a fundamental difference between traditional games and pure microtransaction harvesters. And the problem is...

The problem is that the microtransaction model encourages developers to negatively impact these core game mechanics.

If by "negatively impact", you mean "completely eliminates", then you're right, because there are two types of pschological "reward" in gaming. Microtransactions fulfill our desire for recognition and completeness, and they are, as the guys at Extra Credits say, pur Skinner-boxing (I would link, but the stupid iPad would wipe this message if I tried to find another webpage).

Traditional gaming rewards in a more subtle level -- mastery of mechanics gets you into an almost meditative "flow" state during play, and improved mastery means longer unbroken sessions of flow, which is exhilarating (even more so when the play is physical and high-speed -- eg skiing). Early computer games didn't do a lot of recognition, with the waves in Space Invaders, for example, being identical apart from their speed. The next step was to include some visual confirmation of progression, and Centipede did that by changing colour between stages, whereas PacMan relied on stage numbers and occassional interstitial animations, and Donkey Kong had multiple different screens. Then we had progression through a combination of these (Pengo had the baddies change colour on each level, accompanied with interstitial screens on the same every-third-level schedule as PacMan, Ms PacMan added multiple maps).

As I say, these supported the mastery of mechanics by making explicit how much you had improved. I'm a language hobbyist, and my early experience of language at school was frustration at a perceived lack of progress, which was demotivating. As it turned out, I was progressing relatively fast, but I just couldn't see it at the time.

But microtransactions often completely replace the core mechanics, and there is nothing to learn, nothing to master. There is no lasting flow state, just momentary shots of neurochemicals when you get a stupid fanfare noise on the screen and hit the next arbitrary milestone

Re:B2B only

[Half-pint HAL]

Gaming arcades had to make a game, and playing the game had to be fun, and you had to be able to get bette with practise or you wouldn't come back. Microtransaction games often have no "game" at all -- no mechanics to master, no real choices to make. With an arcade machine, you have to decide to start every time you come back to the machine, but with microtransaction games, you only choose to start once and all your progress is saved in perpetuity -- but you do have to decide to stop.

Re:B2B only

[Anonymous Coward]

> buy-to-own games

More like buy-to-rent...

Re:B2B only

[Curunir_wolf]

FTFA:

“It was an a-ha moment when we realized freemium was better-suited for consumer offerings or simplified business functionality for smaller needs.”

I recommend that investors stay away from this company. For the next experiment, they'll be offering taxi service in rural areas, and wondering why they can't sell coats at their beach stores.

Re:B2B only

[mlts]

You can see this with tower defense games before and after IAP was put in. Before, they had varying difficulty levels and were tuned to be solvable.

After IAP, the games are tuned at a far higher difficulty level, expecting people to buy new towers, buy extra points for powerups, or pay money so they don't have to wait a few hours before trying again.

This is true with other genres. Bejeweled has morphed to Candy Crush Saga so losing a game goes from starting over to having to pay money, beg friends to play on Facebook, or wait a time period.

Games as a genre have changed too, where items like playing video poker, slots, and other gambling simulations have become popular. The main reason is that animating a one armed bandit is relatively cheap compared to trying to do a decent innovative game, or even a run of the mill tower defense game. Plus, people will pay for the virtual currency used.

Of course, new IP is hard to come by. This seems to be a mirror of the gaming industry as a whole, where the focus isn't on generating new content, but monetizing the same tired, old IP that was in games last year. Instead of a new Call of Duty game, it is another app doing the same thing, except with more demands for IAP, and more attempts to download and copy the user's data for "market research" purposes.

Re:B2B only

[TemporalBeing]

Microtransaction based games have a fundamental problem and that is that rather than being primarily designed to be fun, they are instead primarily designed to be addictive and to drive the user toward making microtransactions in order to maintain the play that they've become addicted to. However, games that offer mostly cosmetic microtransactions that don't offer a substantial in-game advantage usually manage to avoid this problem.

Exactly.

I had a game on my tablet that I liked playing. Only I got so far and couldn't go any further without participating in the micro-transactions. Needless to say, I dropped it like a rock and moved on to other things.

Re:B2B only

[meta-monkey]

I was talking with my brother this weekend about what got us into computing when we were young (late 70s for him, early 80s for me) and he said for him it was video games. Our parents had taken him to their friends' house and their kid had this motorcycle game hooked up to the TV, the first thing he'd ever seen like that. You could move the handlebar controller and the little stick figure on a motorcycle on the screen would move and this was the coolest shit.

And my response was "and just think how much better it would have been with exclusive pre-order content, microtransactions and zero-day DLC!"

Re:B2B only

[Anonymous Coward]

There are parts of the industry where freemium is working; League of Legends, which has a particularly benign version of the model, is a huge success and will remain so for the foreseeable future. A few failing MMOs, such as Lord of the Rings Online and Star Wars: The Old Republic have managed to extend their lives by moving partially or fully to a freemium model.

On the other hand for some MMOs like City of Heroes the switch to "freemium" was the death knell of what used to be a rather successful game. I don't think it lasted even a year on that model after being subscriber based for several years.

Re:B2B only

[Anonymous Coward]

Microtransaction based games have a fundamental problem and that is that rather than being primarily designed to be fun, they are instead primarily designed to be addictive and to drive the user toward making microtransactions in order to maintain the play that they've become addicted to. However, games that offer mostly cosmetic microtransactions that don't offer a substantial in-game advantage usually manage to avoid this problem.

And is it really a "Microtransaction" if it's $5? That's the cost of a meal, not a "Microtransaction". How about $1 ? That's the cost of a coffee or lottery ticket, not a "microtransaction". A "Microtransaction" in my mind is more like $0.10 or $0.05

Re:B2B only

[joelovestoastoo]

Traditional gaming rewards in a more subtle level -- mastery of mechanics gets you into an almost meditative "flow" state during play, and improved mastery means longer unbroken sessions of flow, which is exhilarating (even more so when the play is physical and high-speed -- eg skiing). Early computer games didn't do a lot of recognition, with the waves in Space Invaders, for example, being identical apart from their speed. The next step was to include some visual confirmation of progression, and Centipede did that by changing colour between stages, whereas PacMan relied on stage numbers and occassional interstitial animations, and Donkey Kong had multiple different screens. Then we had progression through a combination of these (Pengo had the baddies change colour on each level, accompanied with interstitial screens on the same every-third-level schedule as PacMan, Ms PacMan added multiple maps).

Some of this comment is overly generalized and not entirely correct. The creator of Space Invaders did say he wanted the primary motivator to be the exhilaration of destroying the alien ships, yes, but he also said he wanted it to be easier and it's relatively common knowledge (or so I thought) that the game is intended to be harder than it starts out. It was actually programmed to run at the same speed through each wave but since there's less to render when there are fewer ships left, it moves faster as the wave is reduced (the intended speed). The lack of color was also a technological limitation, not a real design decision. Space Invaders was notable for being one of the only arcade games a player could beat with a single payment, if they played well enough.

More recently, games have very much turned away from necessary skill and improvement as the primary motivator, even without the freemium model being a primary influence. Contrast a game like Dark Souls with Skyrim: one is very much about skill and gradually improving and the other doesn't intend to make you try harder at anything or to learn anything new (in fact, the game becomes easier the more you get hit). I would argue that the second is far more common, especially in blockbuster titles (Grand Theft Auto, God of War) and you should recognize (from Extra Credits, if nowhere else) that most games give players more and stronger powers / abilities and therefore make themselves easier as the player progresses through the story. Games and player progression within them these days are rarely about skill so much as gaining more powers to make the gameplay increasingly trivial, though well-done games tend to scale challenges well. This has been incredibly common in the games industry even without being built around freemium models, though obviously proper competitive titles and skill-based challenges do exist and are relatively popular. Still, saying games are fundamentally about challenge is a value judgment that I do not think holds water.

Re:B2B only

[darkain]

Secondly, they're only talking about B2B Apps (as in phone apps or little web tools). The freemium model has been working out well for VMWare with their "Player" product encouraging people to get "Workstation" and their "Hypervisor" product encourage people to get the full "vSphere" suite. Oracle is doing this with the acquisition of Sun and MySQL server, trying to convince users to switch over to their Enterprise Server products. There are plenty of other examples in this space, too.

Re:B2B only

[KGIII]

I can beat all of the Super Street Fighters up to II Turbo on a single PAIR of coins. They were always 50 cents when I played. I have not played in many, many years. If the mechanics are reasonably the same I could probably do it with the new versions, too.

Re:B2B only

[phantomfive]

Good point.

Re:B2B only

[CohibaVancouver]

It was possible to beat coin-op arcade games on a single quarter

Not on the first play. After hundreds of quarters, yeah, maybe.

Re:B2B only

[AK Marc]

There is no end to the new games. What's the "end" to the village builder games? Every building? Every building at max level? Full resource stores? There are so many "ends" that a 3rd party can't easily analyze it.

And the pay to win games can be won without spending anything. So long as someone defines "win" before you start playing.

Re:B2B only

[Dutch Gun]

Still, saying games are fundamentally about challenge is a value judgment that I do not think holds water.

I definitely agree. Many people don't understand or accept that different people enjoy different aspects of different types of games. For instance, I've heard from people who hate cutscenes say "I don't want to watch a movie, I want to play a game!" For me, watching an involved story through lengthy cutscenes is not painful (unless horribly done), but one of those *rewards* for getting through parts of the gameplay. Moreover, some people dislike the Elder Scrolls games because of the weak combat, but I love them because I take great pleasure in exploring new worlds.

Re:B2B only

[Half-pint HAL]

I'm certainly not saying there's not a spectrum between pure "play" games and pure "badges" games -- there is. In traditional FPSes, you got access to better weapons as you progressed, but that was more than offset by the bad guys getting more difficult to beat, so you still had to improve as a player. Perhaps player skill has plateaued and we're all as good as we'll ever be until a sufficiently novel paradigm is invented. Role-playing games, on the other hand, typically don't encourage mastery, as mere XP farming will win any fight. That's why I got bored of playing Final Fantasy games on my iPad.

First-to-market, niche markets and dependencies

[Anonymous Coward]

Honestly it seems like the freemium model is only sustainable in cases where you're first to market with a product (no competition), niche markets (where people don't or can't compete [e.g.: specific expertise requirements, software patents, little to no profit margins, etc]) or in places where the software (or service) is reliant upon something you control (e.g.: specialty hardware).

You see it with scientific devices for example which are coming with more and more free and extendable software but still require you to purchase expensive vendor locked hardware and maintenance contracts.

Greed is the problem.

[Nyder]

The successful freemium games I have played have been successful because greed isn't the motive. Generally because those don't require you buying anything, don't make it so you have to buy stuff to be successful and keep adding new content. Marvel Heroes 2015 is one of the best examples of this. And I have happily spent over $100 on it over the last 2 years. I don't play the game very much anymore, but I'm not above buying a new hero I like when it comes out just to support the company for making a fun "freemium" game.

Too many games force you to actually have to purchase stuff to compete, or have really annoying buy this ads. Don't update with new content. Give you hardly any play time, wanting you to buy more. I have enough games in my collection that I don't have to play yours if you make it to much of a pain.

Re:Greed is the problem.

[Nyder]

The successful freemium games I have played have been successful because greed isn't the motive. Generally because those don't require you buying anything, don't make it so you have to buy stuff to be successful and keep adding new content. Marvel Heroes 2015 is one of the best examples of this. And I have happily spent over $100 on it over the last 2 years. I don't play the game very much anymore, but I'm not above buying a new hero I like when it comes out just to support the company for making a fun "freemium" game.

Too many games force you to actually have to purchase stuff to compete, or have really annoying buy this ads. Don't update with new content. Give you hardly any play time, wanting you to buy more. I have enough games in my collection that I don't have to play yours if you make it to much of a pain.

Look, I didn't read the article and apparently I didn't even read the freaking summary properly. I am stoned and I'm a big gamer. I didn't know there was "freemium" business apps. Seems like a stupid model for business apps. My bad!

Re:Greed is the problem.

[ruir]

I was thinking how to put it, and frankly you it the nail here. If some game allows me to play for a while, but then the game basically halts until you buy something, and that was exactly stated upfront (i.e. you only allow you to play x levels), I feel cheated and go away. Now, for instance, I think sentinel got it right, for instance. It allows to play me as much as I want and either I get things like stronger weapons through (a lot of) grinding or I go the faster route and I pay for them. I think it is fair, everyone has to make a living.

Re:Greed is the problem.

[gl4ss]

freemium business apps is pretty much this:

a free tier plan with a service that is online based. think github etc.

it's like shareware, except the service can go away any day were you a paying customer or not, so if you were putting big money into it, why would you? especially if cloning most of these services to your own cloud instances is in most cases cheaper than licensing the top tier levels.

Re:Greed is the problem.

[johanw]

The worst recent example would be Angry Birds 2. After the reviews I decided to not even give it a try.

Re:Greed is the problem.

[l0n3s0m3phr34k]

TFA is about a level of software that can cost hundreds of thousands, if not millions. The VC's are stupid to expect any company who would cut costs on enterprise software to succeed...all real enterprise software are governed by SLA's and no corp in their right mind would allow this on their network.

It works in games because your willing to put up with the inconveniences of the ads. An analogy to this is if the ads are analogies to the enterprise software's system-disrupting bugs that pop up in a corp environment. Then imagine that if you didn't "click through" on that ad within a few seconds, the "free app" got to charge you real $$$ each time, even a few cents. Would you play that game? That's basically the risks this "freemium" is trying, and failed. It's trying to shift the VERY real risks of failure into "hey it's free". If it spectacularly fails, companies are fined tens of thousands of dollars per hour/minute for breaking their contracts with each other. That is the "enterprise class" software world.

Re:Greed is the problem.

[Intrepid imaginaut]

While I know it's heresy to actually read the article, the point being made is that enterprise solutions don't work well with the freemium model, which one would have thought was intuitive, but thanks for the pious moralisations all the same.

It was always a scam

[msobkow]

The freemium model was always based on a scam: we "give away" the product, but for it to actually be useful, you have to pay. So anyone who tried the free version came away disillusioned about what the tool or product could actually do, and those who realized they needed to pay for the useful features came away feeling ripped off because "it's supposed to be free."

Worse still are those products where you can do everything with the free version, but it's a pain in the arse to do so compared to using the add-ons.

Let us face it: very few products can be built on a framework-and-plugin model successfully. In order for it to work in the market, those plugins have to provide some pretty impressive functionality to justify paying for them. But due to greed, a lot of the people and companies who tried this model instead shipped a crippled "free" version to force you to pay for the plugins and expansions.

In short, they treated their market as gullible idiots. And their market rebelled against being taken for fools.

Re:It was always a scam

[ruir]

Is it? I have seen several games in iOS where I do not feel cheated if I have to pay for extra functionality. On the contrary, I feel very cheated with games where they place a timeout between levels.

Re:It was always a scam

[phantomfive]

In short, they treated their market as gullible idiots. And their market rebelled against being taken for fools.

If you're talking about games (the article isn't), in many cases, the market responded to being "taken for fools" by paying lots of money.

Re:It was always a scam

[msobkow]

i.e. Those cases where the plugin/add-on model actually made sense.

The problem was most companies who went the "freemium" route did not have that model in place for their software.

Re:It was always a scam

[msobkow]

The article isn't about games.

Re:It was always a scam

[l0n3s0m3phr34k]

No one runs iOS on enterprise level hardware. Nor do you play any games on it. This guy tried to compete in an IBM level world, "enterprise class" like Oracle, SAP, RHEL, Microsoft (haha) and is running into requirements coming in from SLA's signed between other contractors. The enterprise world is a maze of cross-competing contracts that are all industry-standard set by external (ITIL, NIST, HIPAA, etc) policies. "It's free!" doesn't help with an SLA fine that can be in the millions.

Re:It was always a scam

[Anonymous Coward]

Yes, exactly right, it's this kind of entitlement complex that's a problem for freemium games. The idea that if you don't pay anything for something then that entitles you to something else for free too. The idea that they're not providing a free thing for you to waste your time on, but that you're investing your time in their product out of the goodness of your heart, so you deserve the full product now.

Yeah, that kind of narcissism sure does affect the freemium model.

Re: It was always a scam

[easyTree]

Meds. Muh eh duh ssss.

Get some soon...

Re:It was always a scam

[meta-monkey]

It's also nothing new. Back in the day we called it "crippleware." Freemium is just a little less crippled, but it's the same thing.

But I suppose going to the VCs and saying "we've adopted a freemium business model" sounds better than "we sell crippleware."

Re:It was always a scam

[Anonymous Coward]

Here's an idea: if using a free service makes you angry, stop using the service.

Consumer Hostile

[nateman1352]

Freemium is pretty disgusting really. Instead of just buying the game, you have to keep paying for the game constantly. You pay every time they add a new sword/gun/zombie killing plant a la "micro transactions." Honestly its almost as bad as slot machines in a vegas casino. There is a funny tongue in cheek game called DLC Quest about this... which you only have to pay for once :)

Re:Consumer Hostile

[Anonymous Coward]

It is actually quite a nice lesson of economics for the little ones. They have their money and a device that has no connection to bank account so they have to buy the vouchers or whatever these things are called. In this way they are very aware about the money being spent. Consequently after initial rush to one game or another they stopped spending except minecraft for which they bought extension of some sort but they did it once in so many months. The gaming industry suffer this way I guess but I am not ready for this shit and I hope my kids learned. I can pay a little sum for a good application after I tried free version. But that is it.

Freemium isn't going anywhere

[ihtoit]

As long as suckers download Angry Birds and other such "free" apps, they'll make micropayments for premium DLC. I can tell you from making my wife go cold turkey from spending £40 a month on ONE FREEMIUM GAME that Freemium as a concept is the single best way of making idiots part with money.

I do play four Freemium titles: "Family Guy: The Quest For Stuff", "Trainstation", "Battlestar Galactica Online" and "World Of Tanks". However, I have never made a single payment to any of them.

I am a scummy freeloader, fuck you very much.

Re:Freemium isn't going anywhere

[ruir]

I have notice that generally freemium games for kids, and some for adults even have insidious ways of making you pay (i.e. not the first time I reach the payments menu without really wanting to do it). And between having a kid playing and that, they are very strong reasons to disable in-app payments.

Re:Freemium isn't going anywhere

[Gilgaron]

I downloaded Angry Birds on my Kindle to let my 3 year old try it out since it is popular, seemed innocuous and I figured she was old enough to play a game here and there. I was shocked at how quickly she found the "buy stuff" screen. I'd looked around in the game and missed it, figuring maybe it was free as an advert for their more recent versions, but no... hidden from adult eyes but easily found by children.

Re:Freemium isn't going anywhere

[ihtoit]

the games I play I wouldn't be playing if there was no other way to get the premium content. Rather than part with mobile phone information (how a lot of these things work - they debit your phone account) I find a way to grind ingame credit for it. For instance, in Battlestar Galactica, I could spend £80 for enough Cubits and Merits (general credit and PvP battle credit respectively) to buy the top tier ship. I find the game a lot of fun (I wouldn't be playing it otherwise) and prefer to grind my way up to the top tier ship by blowing the snot out of my opponents (that and I love to see grown virgins cry). I'm about 1/4 the way there. Give it another year, and I'll have my top tier ship through hard work and the ingame experience to use it effectively.

Re:Freemium isn't going anywhere

[Anonymous Coward]

Sorry, that doesn't mean Angry Birds employs some kind of design sorcery, it just means you're dumber than your 3-year-old.

Business freemium? You be damned!

[sanf780]

I cannot see how easy a freemium environment works inside the business space. Is it something like the difference between Visual Studio Express ( (1) freemium) and Visual Studio (premium)? Or between Windows Starter and Windows Pro? If you need a specific feature - and most of the time you need that specific thing in the higher tier license - you just go for the premium version. If you do not realize you need the premium version at the beginning, then both vendor and you are in a bad position. If you are going to change software, you might also consider at this stage alternatives. Then you will get remorse due to the time you spent with this half-arsed version of the tool.
At the end of the day, we are talking about the business world, and not a consumer one. If freemium is so prevalent in the consumer mobile space is because applications can get revenue from advertising. You better not show unrelated adverts to a business client.
Note 1: Large business should not use Visual Studio Community due to licensing.

Re:Business freemium? You be damned!

[Curunir_wolf]

Note 1: Large business should not use Visual Studio Community due to licensing.

Actually, large business CANNOT use Visual Studio Community due to licensing. Not for anything productive, anyway.

Re:Business freemium? You be damned!

[diga33]

Actually, large business CANNOT use Visual Studio Community due to licensing. Not for anything productive, anyway.

Unless is it's used for education or open source and that may still be significant in any business,

Enterprise softare market

[l0n3s0m3phr34k]

I could have told him that too...enterprise users don't care about cost really. We need something that works 99.999%, has reliable troubleshooting / tracking when it doesn't work, and 24/7 support specialists. It's all done under a financial penalty SLA (service level agreement). We can't skip on this as our clients already have us locked into contracts so the risk isn't worth the "free reward". When my client's stuff breaks, I have 15-30 minutes to ge5t the needed support on the line, no matter the time, across the planet and multiple time zone / languages. I would hate for the root cause to be tracked back to some "freemium" software that I installed; the ITIL change control should have caught this software before it was ever installed. No one is allowed to install software without a clearly defined ITIL compliant review system, all software must meet SLA requirements.

This reminds me of Uber using "alternative delivery" and sneaking past licensed taxi services; they are getting away with it in some places but in others are being found to violate local laws. Enterprise software has similar checks and balances, but is far faster to discover software without SLA requirements...either via hacks of non-compliant software (see Sony GOP hack exploiting SAP/Oracle/Java/whatever) or system failures and SLA fines (EDS's million dollar FAA SABRE outage fines).

Re:Enterprise softare market

[Anonymous Coward]

enterprise...We need something that works 99.999%

From what I've seen of "enterprise" software, it works 0.001% of the time. In other words, the inverse of what you posted. We use Oracle Fusion, and their Global Payroll add-on hasn't printed a single correct paycheck so far. Their system for retroactive adjustments is pretty good, but you shouldn't have to use it for every employee for every paycheck.

Re:Enterprise softare market

[Antique Geekmeister]

> I could have told him that too...enterprise users don't care about cost really.

Oh, my, but we do.

> t's all done under a financial penalty SLA (service level agreement). We can't skip on this as our clients already have us locked into contract

Then I suggest you revisit most open source and free software companies. Uber is a different situation: they're filling a market niche that the cab companies had a very effective cartel for. But I'm _personally_ doing quite well with free software and open source software: Freemium _for closed source products has never worked well.

Re:Enterprise softare market

[Grishnakh]

But I'm _personally_ doing quite well with free software and open source software:

So how does your business work, in general terms? Are you running a small FOSS-based business, or something larger?

Re:Enterprise softare market

[CanadianMacFan]

Not every application that gets installed in an enterprise is mission critical. If you sell stuff on the web then your site is mission critical. An app that analyzes your logs to send reports to the managers, while high profile, isn't mission critical. I was in a government department that had an application that was used to vote for favourite images. (They built it internally and did a crap job but that's beside the point.) Hardly something that needs to work 99.999%.

It doesn't matter the source of the software, if you have your process then you are going to test it to make sure that it isn't going to upset your environment. If any provider can't support you with the required coverage then you aren't going to go with them. It doesn't matter if it's a big multinational charging millions or a freemium package or open source.

Re:Enterprise softare market

[Antique Geekmeister]

Larger. Without getting into company details I'd prefer not to share, we support enterprise applications in house, and are the "go-to" internal consultants for development projects. We also integrate our systems with partners, and clients, to ensure that we can work with each other's workflow and API's. It's been very positive, and we've been able to effectively swap employees with partners and clients on a few occasions to improve both companies. As much of the software is "fee as in speech" as I can arrange, for business and political reasons, and most of the remainder is open source.

Bad design

[penguinoid]

Freemium games have a tendency to be badly designed so as to "encourage" people to pay up. As such, people become inherently suspicious of them. Maybe they should just go back to having a demo and sell the complete version.

American idiot

[Anonymous Coward]

"parting with money is preferable to playing yet more of the game."

I don't think that means what you think it means...

Re: American idiot

[easyTree]

I think your being unreasonable. There government actively encourages low standards in education. Jeez, just look at the Burger State where they mandate the teaching of something that is blatant nonsense.
In such a climate, how would you're spelling rate?

Re: American idiot

[N!k0N]

I think your being unreasonable. There government actively encourages low standards in education. Jeez, just look at the Burger State where they mandate the teaching of something that is blatant nonsense. In such a climate, how would you're spelling rate?

I really hope you got those wrong on purpose ...

Re: American idiot

[Anonymous Coward]

... says the guy who hasn't figured out the period, still.

erm...

[Anonymous Coward]

idiots! the article is not about games.... jeez shows /.-ers general IQs lol...

It still is

[Britz]

Freemium is alive and kicking. Especially with companies that don't have enough money for marketing. Maybe they cut back on features for the free offering. But a digital product that can be distributed over the internet is naturally suited for the freemium model.

I just started using Cloudbacko, for example. I had to purchase the pro version immediately, because I needed the bandwidth limiter, but other than that, the free version is the perfect entry to this software.

Re:It still is

[Registered Coward v2]

Freemium is alive and kicking. Especially with companies that don't have enough money for marketing. Maybe they cut back on features for the free offering. But a digital product that can be distributed over the internet is naturally suited for the freemium model.

/quoteWhile cloud based software may be easy to distribute on a freemium model, that's not the issue. The challenge is to convert enough of the free users to paid usr to sustain your business. Unless there is a compelling reason to pay many users will stick with the free version and when it ceases to exist simply move to the next free offering that is similar. If your are selling to businesses there is also a differing level of expectations relative to support; so you also must have sufficient support staff to provide support even if your paid user base is too small to maintain its viability long term.

Whatever happened to free?

[Hagaric]

Time & time again I experience this: I have a task, I look for a free opensource solution, I find one, only to discover that it's essentially bait for a commercial version, and it is nigh-on impossible to get it to work without coughing up for the pay version, which is almost always ridiculously overpriced, and to add insult to injury, the broken version is covered in ads for the commercial one.

I've wasted my time, the company will never get my money because they pissed me off with a broken "free" version which appears only to exist to satisfy the license of the source they based their product on, and is published in the most obfuscated and undocumented way they can get away with.

I'd be happy with something that worked with a given feature set, and offered more functionality for pay, I'd pay for that. This is not the same as figuring out how to cripple the most core feature in order to force people to buy...

This is not the opensource we were looking for.

Re:Whatever happened to free?

[Jiro]

I've never heard of an open source license that allows you to release two versions and only give away the source for one of the versions, and I don't think that satisfies any common definition of open source anyway.

Either you aren't required to release the source, in which case the free version wasn't released to satisfy the license, or you are required to release the source, and the free version still doesn't satisfy the license because you need to give the source of all the versions you release. There may be a case where you only have to release the source for the part that isn't yours, but that still wouldn't lead to a broken free version just to satisfy the license--they'd just release the source that they received without modifying it at all.

Re:Whatever happened to free?

[mrun4982]

Try running a company that gives away your core product, or a version of it that has most of the features people care about, for free and see how well you do.

Re: Whatever happened to free?

[BarbaraHudson]

You might want to look at the FreeBSD license. The source is free and you can merge it with your code to create products without offering the source. This is the type of license that, unlike the GPL, gives you real freedom.

RHEL *is* business freemium

[Anonymous Coward]

Being freemium is one of the things which distinguishes RHEL from CentOS. There are several other companies that exist by offering FOSS under a freemium model -- 'community' version that has some limitations is free but 'enterprise' version with extra features (or just support) has a cost proportional to the number of servers or CPUs or other size indicator.

Just shareware renamed

[Anonymous Coward]

freemium was just a new name for what used to be called shareware. but VCs won't invest in shareware companies so they dressed up the idea, renamed it and sold it to the VCs.

Re:Just shareware renamed

[gnupun]

But many freemium games allow you access to almost all the content (say 70-90% of the game) for free whereas shareware gives you only about 5-10% of the full game for free.

Another difference is freemium content is 10-100 times more expensive (but buyers won't notice because they pay small amounts in micro-transactions) than full commercial or shareware games. The high price is because the premium content in freemium games allows the buyer to win easily against free players, which is not how shareware works.

Huh? This doesn't make sense

[argStyopa]

So wait, giving something away for free isn't a sustainable business model?

But this is the "New economy" isn't it?

Re:Huh? This doesn't make sense

[gnupun]

Maybe there are not many impulsive, big spenders in the business world to sustain the freemium business model.

Another example:

[DarthVain]

DOTA2. Which has only allowed the buying of cosmetic enhancements of the game. You can make it look or act a bit different, and show off to others, but it has more less zero impact on competition. The last couple of years they have added compendiums, which are a somewhat novel way to add to the model. First it leverages the whole "Kickstarter" crowdfunded kind of idea, where the more people that buy it, the more stuff everyone that does gets. Much of it is "special" cosmetic things as mentioned above, but also includes fun little side game options, but which again give no advantage to anyone. In addition, they pledge that a percentage of everything will go to the big DOTA2 international gaming tournament, which is kind of like betting, and makes for bigger and bigger prizes, and it is kind of interesting to be part of that, if if your changes are slim to none...

All the rest of the competitive freemium models fail in my opinion. There are 3 types. One is an impossible to beat single player game where only by buying stuff can you achieve crazy scores you can brag about, the second are PvP type games where you have to keep up with the jones' in order to have half a chance not getting blown away by somebodies multi-barreled wand of megadeath. Can't remember the 3rd type as my mind wandered.... but it was probably a variation on the same theme...

Re:Huh? This doesn't make sense

[Hognoxious]

You make it up on volume, or something like that.