Freemium

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Freemium is a business model in which the basic product is offered for free, while the full product and extensions are available for a fee. In the case of computer games, it is better known as " free-to-play ".

origin

Freemium is a made-up word consisting of free and premium . Many internet companies use freemium as a business model. B. Spotify , Skype , Flickr , XING , Zynga and Pandora .

Since the commercialization of the Internet in the mid-1990s, the freemium business model has been a common approach in order to generate profits from generally freely available services (early international example: Netscape Communications , Germany: Web.de ). For software products, an analog model is even older and is now very prominent, for example at Adobe Inc. with the free Acrobat Reader . For a long time only Adobe Acrobat was available for the convenient creation of PDF files from many Windows application programs .

The venture capitalist Fred Wilson described the freemium model as follows on March 23, 2006: "Offer your service for free, may or may not include advertisements, attract many customers efficiently through word of mouth, advertising partners, search engine placement and so on. and then offer your customer base additional services or an extended version of your service at a surcharge. "

After Wilson described the business model, he asked for suggestions for a name. Within a few hours, more than 30 names were suggested by his blog readers. The freemium proposal was finally accepted. Since then, the term has appeared in Wired magazine and Business 2.0 magazine and has been used by bloggers such as Chris Anderson (Editor-in-Chief of Wired) and Tom Evslin. In 2009, Anderson published the book Free , which describes the increasing popularity of this business model.

variants

In principle, especially with software products, a distinction must be made between free and fully functioning software on the one hand and free, but limited usable software on the other. While with free software users receive the complete product including the rights to view and change the source code, with software and services according to the freemium model they only get an excerpt from the range of services of the product and never comprehensive rights, e.g. B. to change the source code or even to be allowed to see it.

The differences between the free basic version and the paid premium version vary depending on the product.

Computer games

Computer games (especially browser and mobile phone games) are increasingly being marketed as freemium products. However, one speaks here of " Free To Play ". Proceeds are generated through advertising placed in the game and the purchase of virtual objects or advantages over other players for real money. The latter is often criticized with the phrase “pay to win”, which is supposed to mean that customers who pay for the content of a game have improved or accelerated chances of success in the game.

Application software

  • Functional scope : The basic and premium version differ in the functional scope.
  • Capacity : The full range of functions can initially also be used in the basic version. The usage (e.g. duration, bandwidth, file size) is measured during usage. Once the volume limit has been reached, the product can only be used to a limited extent. One example of this is the SQL Server Express . In the freemium version, the size of databases is limited to 10 GB.
  • Customer group : Certain customer groups are offered the full product free of charge. An example of this is Microsoft's Dreamspark model . Selected software students are offered free of charge here.

hardware

Even hardware is marketed with the freemium business model. The provider publishes plans, component lists and instructions free of charge, often as free hardware , with the aim of creating an online community which in turn contributes to improving the product ( crowdsourcing ). If the necessary attention and a need have been created, the provider offers kits or finished products based on them. The target group are customers who do not have the time or skill to assemble the product themselves, but want to own it and are willing to pay for it. Chris Anderson pursues this business model with his company DIY Drones and describes it in his book Free .

Books

Books are also offered as freemium products. The electronic version ( audio book , e-book , website ) serves as the basic product ; the bound book is the premium product. The aforementioned book Free by Chris Anderson was marketed in this way.

Daniel Shiffman published The Nature of Code as a hardcover book in 2012 . The e-book can be downloaded for a freely selectable price between 0 and 50 $ ( Pay-What-You-Want ). The electronic version in HTML including all sample programs are available online free of charge. Shiffman financed the initial investment in 2011 through the crowdsourcing platform Kickstarter.com .

Newspapers

In December 2013, the Federal Association of German Newspaper Publishers (BDZV) announced that 70 newspaper titles in Germany had now set up paid content models on their websites. 71 percent of the newspapers use the freemium variant . Here, the editors decide which content is free and which is made available for a fee. Alternative payment models are the metered model , in which a certain number of articles per month can be read free of charge. Any additional access to articles is subject to a charge. In contrast to this, with a "hard payment barrier" all articles are chargeable.

watch TV

In Germany and Austria, many private TV channels can only be received free of charge in SD resolution ( Free TV ), while HD reception costs money (see HD + / HD Austria ).

meaning

In the field of application software, computer games and smartphone apps, freemium is playing a growing role as a business model:

In June 2011, PC World reported that paid antivirus programs were losing market share in favor of freemium products or completely free virus scanners. This has led to most providers now offering a freemium version.

This business model is also established on smartphones. In July 2013, the market share of freemium apps in Apple's App Store was 71%.

criticism

The partially painful limitations of the free, but not free software to terms such as crippleware , Nag or Quengelware or Expireware out.

In contrast to software products, where this model has a negative connotation due to the software that is often not useful, internet services on the freemium model can be used in a useful way, especially in the SOHO environment.

Trivia

  • In the South Park episode “Freemium is not available for free”, “Freemium” is translated as “Free” and the alleged Latin word “mium”, which is supposed to mean “not really” . As a result, the focus is also on the problem of addiction to such computer games , which are specifically designed to address susceptible people and encourage them to pay large sums of money via the so-called " micropayment ".

See also

literature

  • Chris Anderson: Free: The Future of a Radical Price . Hyperion, New York 2009, ISBN 1-4013-2290-5 (American English).
  • Chris Anderson: Free: Business Models for the Challenges of the Internet . 1st edition. Campus Verlag, Frankfurt am Main 2009, ISBN 978-3-593-39088-8 (American English, original title: Free - The Future of a Radical Price . Translated by Birgit Schöbnitz and Dzifa Vode).
  • Chris Anderson: Free: How Today's Smartest Businesses Profit by Giving Something for Nothing . Hyperion, New York 2010, ISBN 1-4013-1032-X (American English).
  • Daniel Shiffman: The Nature of Code: Simulating Natural Systems with Processing . Daniel Shiffman, New York 2012, ISBN 0-9859308-0-2 (American English).

Individual evidence

  1. ↑ The Freemium Model And A Desktop App Get The Thumbs Up With Pandora One . TechCrunch . Retrieved September 12, 2013.
  2. ^ The Freemium Business Model . Fred Wilson. Retrieved September 12, 2013.
  3. ↑ CNNMoney Business Magazine: Why It Pays to Give Away the Store ( Memento from October 19, 2013 in the Internet Archive )
  4. ↑ Microsoft Dreamspark
  5. ↑ http://www.diydrones.com/
  6. ↑ http://natureofcode.com/
  7. ↑ http://www.kickstarter.com/projects/shiffman/the-nature-of-code-book-project
  8. ↑ Federal Association of German Newspaper Publishers (BDZV): Paid-Content - online subscription costs an average of eight euros ( memento of the original from December 17, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . Press release dated December 17, 2013, accessed December 17, 2013. @1@ 2Template: Webachiv / IABot / www.bdzv.de
  9. ^ Paid content offers from German newspapers. ( Memento of the original from December 21, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. Retrieved December 17, 2013.  @1@ 2Template: Webachiv / IABot / www.bdzv.de
  10. Jump up ↑ Free Antivirus Programs Rise in Popularity, New Survey Shows . PC World. Retrieved September 11, 2013.
  11. ↑ In-app purchases of freemium apps account for 71 percent of iPhone app sales . Macer head. Retrieved September 11, 2013.