FREEMIUM

The 'Freemium model' is the latest concept from Chris Armstrong, Editor-in-chief of Wired and best known for his 'Long Tail' theory. It could be resume in one sentence :
"experiment with giving away one thing to sell something else."

This means people can use for free a service or a product in a certain limit. Behind this limit the customer will have to pay.This business model has been around for a long time. Shareware always used a model like this and there are many successful software companies that have been built with this model.

Source: blog-conversion.com; wikipedia; http://blogs.icerocket.com/tag/buzz

Examples :

Skype – basic in network voice is free, out of network calling is a premium service

Flickr – a handful of pictures a month is free, heavy users convert to Pro

Trillian – the basic service is free, but there is paid version that is full featured

Newsgator – the web reader is free. If you want to synch with outlook and your mobile phone, that’s a paid service

Box.net – you get 1gb of virtual storage for free, but you have to pay for more than that

Webroot – you can get a free spyware scan, but for full protection you need to pay.

Copernic; MIT; Musicovery; Zylom;

Advantages:

- for customers the product is free.

- By using the free product the customer may found out other applications, that he didn't know about.

- The companies using the freemium concept attract many people to their site, and can sell other products.

Disadvantages:

- If the business plan is not good enough, a company giving away to much risks to create losses.

- Difficulties to stop free product, in order to concentrated on others

- Difficulties to make people addicted to freeware become buyers