Freemium Model Woes

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I listen to a variety of podcasts on startups and small business.  It’s a great way to get ideas on the type of business or service that I could be successful at it.  There’s also a tremendous amount of learning that comes from the experiences other people share.

One particularly good podcast I recommend is Rob Walling’s podcast Startups For the Rest of Us.  I really like his philosophy about startups–small is good and it isn’t all about getting venture capital funding or cashing out for millions of dollars.  I’m more interested in finding something I can do on the side and having a good quality of life versus burning out for the big pay-off.

It was cool to see Walling quoted in a Wall Street Journal article on the freemium model after I’d heard him discuss this same thing in a podcast.  The big take away here is that the freemium model works well for some business models and not so well in others.  According to the article usually only 1% to 2% of your free user base converts and as a result this model is best suited for a situation where you have a lot of users to make that one or two percent of the whole profitable.

Here’s the iTunes podcast link if you’re interested.

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