Freemium – Definition

Over the last few years, a specific, alternative business model has evolved. Its purpose is to provide a service for free, but only in a limited capacity. These products are called Freemium services. So, how exactly does this business model work and is it a profitable solution?

Freemium strategy

The strategy of freemium services involves providing their service for free, but only with the basic functional features. This way, the customer does not risk making a purchase they regret or consider a mistake. It also provides an opportunity for customers to look at the product in more detail. If the service appeals to the potential customer, there is a chance they will upgrade to the premium package, which should be much more developed than the standard version.

Is this business model cost effective for the company?

Companies can derive profits from all version of their service, including freeware. This trend is especially fashionable in the mobile applications field. These applications are created in their basic form, complete with all the needed features and functions, but some advertisements are also displayed. In this way, the application developer can contact other service providers, offering the possibility to advertise in the free version of the product. Premium versions, however, are ad-free as the company gets income from the monthly subscription instead.Where

Where can these solutions be used?

Freemium services have proven rather popular among mobile application developers, which can be a very competitive market. One of the most

Freemium services have proven rather popular among mobile application developers, which can be a very competitive market. One of the most well-known examples of a freemium service is Spotify, which lets users listen to music via its application, although some adverts are played after a period of time. In Spotify’s case, there is a monthly subscription solution. When a user gets the premium package, the advertisements are turned off and some additional features become available.

One of the reasons this strategy is popular in the mobile development sector is because it offers customers a chance to sample the product without the risk of wasting money. Yet, despite this, it still offers the company a decent source of income.