An over promoted business idea of recent times is that “free” is the path to riches. This concept approaches a thought bubble. While only a handful of companies (e.g. Google and Facebook) have achieved widespread adpotion and success by offering free services, the success of these companies has spawned a disproportinate amount of attention on a new business model – the “freemium” model. Top technology blogs like Venture Beat, Giga om, Silcon Valley Watcher and Tech Crunch have covered the topic, Freemium conferences have been held and a pop culture book “Free: The Future of a Radical Price” was a best seller (and top free download).
There are critical distinctions among the oft touted freemium, ”freeluxe” and “paidium” (both newly coined terms by me!) models that should be considered. Perhaps, too many companies choose to pursue the freemium model instead of the paidium model due to the hype over” free”. Perhaps, too many companies chose the freemium route because they don’t see the one significant difference between the freemium and freeluxe models. Perhaps, too many companies choose the freemium model because of the marketing and sales challenges of the paidium model.
As a result of these miscalculations, many good new products are perhaps being brought to the market in the wrong way and there may be a misallocation of (venture) capital as is often the case when bubbles, thought or otherwise, are prevalanet.
Here is a review of the three models.