#2 The freemium business model
Useful if you need to build your userbase, this 'free but at a price' revenue model is becoming increasingly popular
Enter the ‘freemium’ model. Frequently deployed by content business and music streaming sites, the so-called freemium business model acknowledges that where certain classes of product are concerned some sections of the audience expect a ‘free’ ride while others will be prepared to pay a premium for enhanced or additional services.
For instance, music streaming service Spotify offers a free service to all but actively promotes its £9.99 a month subscription plan, which is not only advertising-free but also features higher quality sound.
There are variations on the theme. Location-based dating app Happn has eschewed the subscription model. It’s free to join and everyone can use it to arrange dates, but users have the option of paying extra fees for features that draw attention to their profiles, making a successful connection more likely.
“We didn’t want to impose any subscription-based model to our users, since these are often on auto-renewal and much more expensive,” says co-founder Didier Rappaport. “Our users prefer the fee-for-service model because it leaves them free to use the app how they please.”
The freemium model helps build a base of users but there is a challenge. In order to sign up users the basic (free) service has to be attractive. And if that’s the case, the premium alternative has to offer something demonstrably better. Converting users to paying customers can be difficult.
This is #2 out of 10 ways to make money from your tech business idea.
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