WebNewser is reporting from the Freemium Summit in San Francisco today, which is looking at innovative business models that pair free offerings with paid ones.
WordPress knows a thing or two about offering free versions of a product and yet still getting people to pay for premium features. Toni Schneider, CEO of WordPress parent company Automattic, offered three lessons on how to make it work:
WordPress’ blogging software is free. You can take it and host it wherever you want. You can also host it on WordPress’ servers for free. But if you don’t have the chops to manage all the technical details, WordPress will manage them for you—for a fee. “We only charge for the things that are really hard to do,” Schneider said. “It’s much more likely that’s going to cost somebody else some money if they want to do it, and customers will understand: This is hard, this is expensive, and I’m willing to pay for it.”
Zynga vs. Yahoo Mail: Which has the better freemium model? According to Schneider: Zynga. Their games are free, but if you want to unlock certain features, you have to part with some cash. “There’s a lot of marginal benefit there, and it’s very defensible,” Schneider said. “It’s your game, and nobody else can copy it and give it away for free.” Yahoo Mail, on the other hand, sold its premium service on the fact you’d get more storage. But that value got blown out of the water when Gmail came along and offered unlimited storage—for free.
Many companies using the freemium model tier their offerings offering: The Basic model is free. Pro costs you money. Super-Pro costs even more. WordPress decided to go à la carte instead. “We didn’t want to [offer a tiered model] because we wanted to constantly launch new features and charge for them individually,” Schneider said. “It gives users a choice to just pick the ones that they want.”