Three Ways to Make Money with a “Freemium” Service 17 Comments
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The “freemium” business model is one that works quite well.
What is freemium you ask? It’s the concept between FREE and PREMIUM, yet it can be molded into a unique business model in many different ways.
One example of a successful freemium business model is all of the iPhone apps out there that are free. Think about Angry Birds… would it be as successful as it is today if there wasn’t a free version out there for everyone to play?
Yet at the same time these apps are still generating millions of dollars for their parent companies. The app is free but they are still making money by placing paid advertising through the app, or if they allow users to take action and sign up to different offers in order to get free credits or bonuses. The user gets a few free credits, and the app maker is compensated with a commission on each referred lead through their app.
This type of monetization can also be seen on web sites or blogs that offer free training or guidance to the visitor. Instead of selling a guide or access to the visitor, they can make money by selling ads on their site and compensate themselves for their time and effort to create quality and original content.
Another example of freemium based business model is offering quality content through your web site or blog and being able to monetize your resources and traffic in different ways.
One web site that I’m currently focusing on is in the tech support niche. Right now the site is 100% ad free and full of valuable information for anyone looking to research the IT job market. So if it’s 100% free, how is the site making money? Well, that’s the thing… right now it’s a completely free resource for people to use until it gets to the point where I feel it’s become a large enough resource for people to benefit from advertisements and job listings on the site.
In this specific scenario we are actually focusing our efforts on creating a free resource that provides value to the readers and expect nothing in return, while in the apps freemium model a user would have to sign up to an offer or download a game to earn extra bonus points or rewards. Many companies are now building sites and focusing on monetization later… think about what Twitter has done over the previous years with growing their brand and not focusing on monetization until recently.
Let’s look at one more freemium model, which has been doing extremely well for many online web sites and apps alike.
Below you will see a screenshot from Fandango.com, a very large and successful movie times web site. When you visit the site you will have the option to get free movie tickets if you sign up for some offers.
The crazy thing is, some of these offers will end up making Fandango $50+ from the referral commissions!
While it’s seems like a good deal for the customer to complete a trial offer or sign up for a service to get free movie tickets, it’s really that much better for the company that is offering the incentive!
All three of the freemium business models can be applied to nearly any business model if you have a service, product or information that people want. It’s just a matter of seeing how you can implement the process without making it a hassle for the customer, while still providing you with enough revenue/profit to cover the costs of the service.