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Concept
Freemium
Summary
Freemium, a portmanteau of the words "free" and "premium", is a pricing strategy by which a basic product or service is provided free of charge, but money (a premium) is charged for additional features, services, or virtual (online) or physical (offline) goods that expand the functionality of the free version of the software. This business model has been used in the software industry since the 1980s. A subset of this model used by the video game industry is called free-to-play.
The business model has been in use for software since the 1980s. The term freemium to describe this model appears to have been created much later, in response to a 2006 blog post by venture capitalist Fred Wilson summarizing the model:Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium-priced value-added services or an enhanced version of your service to your customer base.Jarid Lukin of Alacra, one of Wilson's portfolio companies, then suggested the term "freemium" for this model.
In 2009, Chris Anderson published the book Free, which examines the popularity of this business model. As well as for traditional proprietary software and services, it is now also often used by Web 2.0 and open source companies. In 2014, Eric Seufert published the book Freemium Economics, which attempts to deconstruct the economic principles of the freemium model and prescribe a framework for implementing them into software products.
The freemium model is closely related to tiered services. Notable examples include LinkedIn, Badoo, Discord, and in the form of a "soft" paywall, such as those employed by The New York Times and La Presse+. This is often in a time-limited or feature-limited version to promote a paid-for full version. The model is particularly suited to software as the cost of distribution is negligible.
A freemium model is sometimes used to build a consumer base when the marginal cost of producing extra units is low.
Official source
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