Jacques Mattheij

Technology, Coding and Business

Moving to Freemium

Web businesses reach the ‘freemium’ stage through many different avenues, but they all have the same ending, somebody needs to pay for the running of the business and there’s profit to be made. It is one ‘monetization strategy’ that you could follow to earn a living on the web.

Some web businesses started out with something simple and developed unexpected traction for their product, then found out they needed to pay their bills somehow. Some were designed right from day 1 to work this way. Every story (and all of those in between) has the same conclusion, a small, sometimes tiny number of users, will end up paying for all the expenses not covered by other forms of income (such as advertising).

Whether you got there by design or by accident does have a huge impact on the continuity of your business. There are several ways in which you can correct course from a hyper-successful free offering without income to a paid model. Not all of them work equally well.

Some companies turn back the clock, they take things that were free yesterday and place them behind a ‘paywall’, the point where end users have to sign up for the service. In general this method will backfire because you are taking something away and typically this leads to an instant implosion of the traffic and a very vocal resistance by users of the service. That’s good in a way because your expenses are right away a fraction of what they were before, but it’s also bad because you’ve now killed the cow you planned on getting the milk from. Such moves can be quite fatal.

A better solution is, instead of contracting the offer to free customers, to expand the offer for paying customers. That way you do not chase away the freeloading hordes and you can fine-tune your offer to entice as many of them as possible to make the transition from guest or user to customer.

Only when the circumstances are most dire (as in ‘company will go under in three weeks unless’) should you ever remove things that have been free so far from the users. The backlash and negative PR associated with such a move should be avoided, if at all possible. You really do not want to have to write a post like this: ‘how-to-break-the-trust-of-your-users’. (and there is plenty in that post that indicates to me they still don’t get it).

Keep in mind that these ‘freeloaders’ are the people that brought you where you are, killing them off is killing the most important part of the sales funnel, the lead generator.

Better to go a bit slower, to change course gradually and to give your users a chance to adapt to the new direction. And you can always change course multiple times over a longer period of time to get where you want to be, drastic changes usually have a negative net effect. Gradual changes also mean that if you should make a mistake the step back is not that far away, whereas if you give the wheel a violent yank it will be much harder to undo the damage.

Changing course earlier usually means less violent course changes. In the freemium model this is a key insight because it means that you will get to where you want to be in a smoother and more continuous fashion. Changing course at the last moment will wreak havoc on your userbase and will get you a lot of negative press, assuming you’re large enough to warrant press attention.

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