Freemium: Attributes of an Emerging Business Model
4 Pages Posted: 3 Dec 2010 Last revised: 13 Jan 2016
Date Written: December 1, 2010
Abstract
How does freemium work as a model and in practice? This paper draws concepts from the book The Mind Share Market: The Power of an Alternative Currency, by the same author.
A term increasingly used in commerce, freemium designates a business model using two products or services, or a combination of products and services. In such combination, one item is provided at no charge while a complementary item is sold at a positive price to the same general group of customers.
This paper first provides the necessary foundations to understand the model and describes 13 monetization strategies used in 3 types of freemium: quantity (volume, time), feature, and distribution. Second, it defines two distinct transactions taking place during the sale cycle: one using money, and the other using mind share as an alternative currency. Third, the paper considers freemium's attributes relative to multi-sided markets, specifically the presence of distinct sub groups of users and customers and how their interdependence generates indirect network effects.
Keywords: freemium, free versus paid, freeconomics, product differentiation, business model, multi-sided market, two-sided market, free, monetization
JEL Classification: M21, M30, M31, M37, A10
Suggested Citation: Suggested Citation
Register to save articles to
your library
Recommended Papers
-
Business Model Innovation: Creating Value in Times of Change
-
Two-Sided Network Effects: A Theory of Information Product Design
-
The Business Model: Recent Developments and Future Research
By Christoph Zott, Raphael ('raffi") H. Amit, ...
-
Understanding Digital Markets: Review and Assesment
By Michael D. Smith, Joseph Bailey, ...
-
A Five-Factor Asset Pricing Model
By Eugene F. Fama and Kenneth R. French
-
A Study of Factors Affecting Online Buying Behavior: A Conceptual Model
By Vinay Kumar and Ujwala Dange
-
An Intermarket Approach to Beta Rotation: The Strategy, Signal, and Power of Utilities
By Charlie Bilello and Michael Gayed
-
By Victor Ricciardi and Helen K. Simon