11 Slices of the Freemium Revenue Layer Cake

Will Freemium be the model for software and productivity in the 2010s in the way that SaaS was in the 2000s and Client/Server was in the 1900s? Are users ready to trust the cloud? Will virality subsume other marketing strategies?

The answers were “Yes, yes and yes” at this week’s Freemium Summit East. Time will tell whether these answers are right and all paid software models evolve to layers on top of free offerings. Here are my key takeaways from the conference to help you make your predictions.

#1 – “The risk is not that some SaaS leader comes into your market. The risk is that Phil or Sally sitting two rows from you becomes the leader of your market.” – Matt Holleran, Emergence Capital Partners

Taking this parting shot at the end of his address, Holleran’s slide showed a circle/slash symbol over SaaS (Software as a Service). He observed that Freemium is making its way into a number of industries after its successful deployment in customer service and survey markets, as well as that in-product virality can reduce direct marketing expenses to zero or near zero.

#2 – “Freemium can accelerate your ecosystem growth to let you reach different sized customers, different buying behaviors and different customer end-goals.” – Scott McMullan, Google

Scott showed a layer cake created with the right raw ingredients, mixed properly and presented well as analogous to creating a revenue-generating freemium business model that includes core applications, add-ons, ads and consideration to ecosystem impact.

#3 – “Don’t charge for things that bring more users.” – Jonathan Boutelle, SlideShare

Boutelle’s presentation goes beyond describing how SlideShare discovered the right mix of customer value and in-experience triggers to build its premium service. It’s an insightful exploration of growing a business.

#4 – “Inherent virality comes in multiple flavors.” – Brent Chuboda, SurveyMonkey

Stating that, “seeding virality is really hard,” Chuboda described network effects (applications becoming more useful and powerful with usage and more users) and viral loops (use of the app spreads the brand and demonstrates new use cases and potential users).

And the quotes that speak for themselves:

#5 – “It was risky and scary, but our customers benefited. It’s OK to ask for money if you have a great service.” – Anne Driscoll, Ning, talking about the company’s controversial, yet successful move from freemium to paid earlier this year

#6 – “Don’t forget that free is not a business models.” – Owen Tripp, Reputation Defender

#7 – “Make decisions from data rather than hunches.” – Ryan Holmes, HootSuite

#8 – “Freemium only works if the customer is delighted.” – Thor Muller, GetSatisfaction

#9 – “Reviews are the new sales cycle.” – Amit Kulkarni, Manymoon

#10 – “When you have a charitable component, you can increase volume.” Daniel Freeman, Atlassian on the company’s Causium model

#11 – “We are able to compete against cloud services because we have offered people something free that has captured their mind share. That’s why I love freemium.” – Ranjith, Kumaran, YouSendIt

Slide decks from most of the presenters cited above can be found on SlideShare.

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