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How to Monetize a Freemium

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By John Broadbent

Transcript:

Thanks for tuning in to another Make Your Mark Monday. Today we’re talking about freemiums and how to monetize freemiums over time. A freemium is basically a, it’s usually a software or some type of an online service that you offer to people at no charge. The other type of freemium is where you’ve a service that you really need to hit the critical mass of how many users you have for the product to become something that you can offer and premium to somebody else.

A good example of this is, I worked with a group of people that were, they were trying to create an online recruiting form. And really what they needed was either a lot of athletes to be signed up to this, and so they had this pool of athletes that were fantastic that recruiters could come and pay money to have access to, or the other way around: You had to have recruiters that were in this thing all the time in order for athletes to want to pay money to try and get recruited by the company. In one way or the other you’ve got to offer a freemium somewhere so that you can hit this critical mass of users so that you can start charging people money.

Apps are a really good example of freemiums, and they’ve got kind of an interesting model. There are a couple of different ways that they do this. One that we see quite often is they offer a freemium version that has ads all over it, and then they offer a premium version that doesn’t have ads on it. So that type of a model may work out well for you.

We’ve also seen with apps that a lot of them will have just limited features. You see this with a lot of the Angry Bird apps: You’ll have a few levels that you can play, and if you want to go beyond that then you need to pay for the app. Although, in most cases, when you’re looking at a freemium app, you’re also looking at advertising.

So critical mass really is, we’re talking about it in this instance, it comes down to when you’ve got something that people are actually going to start paying for, or people are willing to start paying for, and that’s why I think really the acid test is when you’ve got someone who is willing to pay for that, then you’ve hit the critical mass of users. And it’s just the critical mass of users, not critical mass later with revenue and return and those types of things.

In our webinar this Wednesday, we’ll talk a little bit more about freemiums and I’ll show you a few examples of some freemiums that have actually worked in terms of monetizing it, as well as some freemiums that are extremely promising, but they need to figure out a way to monetize their service, or their online service in order to make this thing work for them.

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