Freemium is Not a Business Model, it’s a Marketing Model

I’ve spent some time this Sunday morning, watching a video on Carsonified’s Vimeo channel, in which Jason Fried from 37 Signals gives a FOWA speak on making money off your by-products. In it, he touches delicately upon the subject of “freemium” and why he thinks it is a bad business decision to give away stuff for free.

Personally I totally, wholeheartedly agree. And just like Jason, I don’t quite fathom why freemium is so accepted as common truth around the web 2.0 anno 2009. Just because we’re in a recession, and Chris Anderson wrote a book about how cool free is, we really shouldn’t be supporting a deflationary cycle, by merrily giving away pretty much everything.

Why Freemium Sucks as a Business Model

Just because most people believe Google ain’t evil, free can be evil to your business. Here’s why…

Freemium Currency is Highly Inflationary

Page views, Twitter followers and the like, are highly inflationary; they get worth less and less over time. 10.000 followers on Twitter today are worth way less than 10.000 followers on Twitter were worth one year ago. And no matter how much they’re worth, they can’t pay your bills, or buy your friend a beer.

Freemium is a Downward Spiral

You should rather spiral upward: Make more money over time. Expand your product portfolio, to sell more. Afterall, if we’re in a global recession why not create some jobs by creating a viable, growing, sustainable business?

Freemium Makes You Lazy

Why create a product that’s worth paying for if you’re giving it away for free anyway? You’ll be less inclined to strive for excellence, since your “customers” are in no position to complain anyway.

Freemium Makes You Crazy

Nah, don’t worry. Freemium won’t make you crazy, it’s just something I wrote because it made a cool headline;-)

Charging for Quality

Charging for a good product with good support can be done. Especially if it makes life easier for the customer. Just look at wonderful WooThemes: A fresh, young company, driven by experienced WordPress designers, who create easy to customize WordPress themes, and provide solid support. That’s a win-win product. WooThemes have also given a few things away for free, but that’s about it. They charge for most of what they do. I like knowing where to go for a solid theme that works, instead of having to wade through endless free WordPress themes, that may or may not work for me, with poor support, just to save a little money, on something that would otherwise cost me a lot more, if I had to hire a professional theme designer at an hourly rate, to do a custom job for me.

Freemium as a Marketing Model

Suddenly it dawned on me: Freemium is a concept not to be utilized as a business model, but instead as a marketing model. That’s an important distinction, and one which has lead to a lot of misunderstandings and wrong assumptions. According to me.

Page views, followers, impressions… All terms more related to marketing than to your bank account balance. You can’t pay your bills with followers. But followers can buy your stuff. If you charge for it, that is. If you don’t charge for your stuff, you’ll never make a dime.

So let’s start marketing for free, which is nice. And charging for quality products, which is also quite nice.

Thank you for reading, and let me know what you think, in the comments!

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Tags: 37 Signals, Carsonified, Chris Anderson, deflation, economy, inflation, Jason Fried, making money, marketing, Vimeo, web 2.0, WooThemes

This entry was posted on Sunday, September 27th, 2009 at 14:18 and is filed under Business, Literature. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.