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March, 2010:

Freemium ain’t new. It is just a new word.

I recently spoke at the Freemium Summit in San Francisco.  The speaker line-up was full of great companies executing on freemium models in the consumer and enterprise space:  companies like Dropbox, Automattic,  and MailChimp.  I was asked to speak as part of the Freemium for Enterprise portion of the program.

Below are my slides from the presentation.  I split the presentation into three sections.

  1. First, an exploration of the freemium business model currently being applied at 3 public companies: LogMeIn, eFax (j2 communications) and Skype.  In studying the public SEC documents for these companies we’ve found a consistant 10 to 1 ratio between free users and paid users. A goal we’re trying to achieve at Xobni.
  2. Second, I show six business/market conditions that can suggest implementing a freemium model.   Many of these conditions are derived from discussions I’ve had with Sean Ellis, who blogs here and has had great freemium experience working with companies like Logmein, Xobni and Dropbox.
  3. Finally, any time I give a talk at a conference I try to give concrete, actionable examples of lessons learned from my own experience in building Xobni’s business.  In this presentation I’ve dedicated the latter half of the content to specific successes we’ve had at Xobni. And this was all made under the warning derived from Paul Buchheit’s brilliant quote: advice=limited experience + overgeneralizations.  So be forewarned :)

And one clarification on a slide that will make no sense unless explained.

golden gate park freemium business

Slide 4  This is a shot of golden gate park

  • My point is that golden gate park is actually a 120 year old freemium model.  90% of visitors don’t pay anything to enjoy the park.  10% pay for the premium services like the tea garden, conservatory and golf course.
  • The foot traffic of free visitors leads to more sales and admissions for the premium services of the park.
  • I looked at golden gate’s financial documents it appears that they still aren’t profitable.  Premium services only provide 40% of the budget.  So, like most things in government, it isn’t profitable (or even break even), but it is at least an attempt at a freemium business.

So with that, here are the slides: