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We love freemiums.

2010 September 16
by Ivy Wan

Revolutionizing how we communicate.The online radio music experiment.

“There has been an attitude where consumers expect everything on the Web to be free.”

The Globe and Mail, “‘Freemium’ services: A Web surfer’s paradise”

But.. when will it stop being free?

Many successful web 2.0 businesses such as Skype, Pandora, and Dropbox use methods of freemiums concept which is to provide a service free while encouraging them to opt for upgraded and enhanced features for a premium.

In the article from the Montreal Gazette, with over 550  billion  Skype users, yet it only generates 7 percent revenue from the premium users. This poses as a potential problem where marketing must be wary of their bottom line figures.

Pandora, a music sharing community, tried the approach of reverse freemiums where they provided free trial periods but ended up losing most users once they asked for money.

In other perspectives, premium products such as hybrid cars are deemed worthwhile purchases when you use it enough. So, if these web 2.0 businesses encourage their free users to use the product enough, they would be able to convince them to upgrade to be premium users.   Or perhaps they should take the RyanAir approach, web 2.0 competitors could offer their free services (or at an incredibly low cost) and charge per addition of extra premiums by unbundling services.

Does it remain ethical to be providing free services if it disrupts existing innovations and knocking out smaller competitors? After all, how do you compete with free?

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