by Cesare Rocchi

On Going Freemium

by Cesare Rocchi

Yes, it happened. Dalton and colleagues did it: they went fremium. While I am not a huge fan of this business model I think it’s a huge step ahead. Here is why.

We are used to free (and it’s wrong)

Facebook free, Twitter free. All free. This is hugely misleading. Do you know how many people will quit using WhatsApp if they have to pay $0.99 (yes ONLY 0.99) a year? A ton. And they are right, because they grew up with the idea that services like that are free. So, when you ask them to pay they get angry. Imagine if you go to a restaurant that says “All free tonight” and on the way out you are presented a bill. You’d be disappointed at least, right? It’s not people’s fault. It’s service providers’ fault. Have you ever thought what’s behind a free product or service? There are people! And they need to be payed! Who is paying them? Usually funds invested by venture capitals. Do you think the situation is sustainable? I don’t. Wanna some proof?

Wasn’t Friendster cool? And Myspace? Ask yourself where are they now. Some more subtle proof? Gmail (and Google Apps for Business) was free for up to 50 users. It meant a company of 50 people could have all the services configured with a custom domain for free. Later it was limited to 10 (a way to sugar the pill?). And now? Z-E-R-O. A bell is ringing in your ear? It should. Even Google, the don’t-be-evil (but essentially cocky) company could not sustain that amount of users for free. Why? Because they are not a money printer! Google Maps were free. And now there is a limit of 25k API calls: after that you pay. And finally the most struggling: twitter. I am sure every developer has thought of (or even built) a mobile client for twitter. The success of twitter was made also by developers who started using the API to build clients. And now? Only a few clients survived and the API calls are very restricted. Lesson to take away: don’t build your product on the API of free services, unless you are ready to suffer the consequences.

What’s wrong? The first step

As you step in the field of services/products you have a big decision to make. How much do I charge? Facebook, Twitter and many more (now dead) services went: “Zero, and then we’ll figure out”. Checkmate! After this move it is very hard to ask people for money, even for additional services. It’s a mental thing and the first impression matters a lot. Many would say: “So far it has been free, now why should I have to pay?”. Conversely, if you first ask some money for a product and then you offer something for free, it is a totally different situation.

The first step of was to be clear since the beginning: “we are building a service and, if you wanna use it, you’ll pay since day one”. Way way different approach. First, even with a small fee to access a service, you cut off a lot of jerks. Second, the first impression you give is: “these guys are here to stay” and that’s way more comforting for developers and for users. Plus, after you have evaluated the outcome of the first step, you can also afford to introduce a free tier as Dalton and colleagues did. Sure, there might be issues, like will this move shake the current equilibrium? will the platform be sustainable? Who knows. The point is that the match was played very well by ADN so far.

Let’s see what happens in the next few months. So far so good.