The "Freemium" Concept

• The « freemium » concept is a business model usually applied by software companies. It mainly consists of attracting clients by giving away a service for free, and then charging them a premium price for full or special features such as value added services or an enhanced version of your service to your customer base . With this approach, the seller is capable of acquiring a lot of customers very efficiently through word of mouth, referral networks, etc.

• Among the many users of the “Freemium” model, two are to be taken into consideration because of the scope of their businesses:
- Skype, the software program which allows users to make telephone calls over the internet to other Skype users free of charge, or to landlines and cell phones for a fee adopted the freemium model and has since then experienced a successful development of the business. Additional features of the services provided by Skype are: instant messaging, file transfer, short message service and video conferencing.
- Netscape , the most popular browser was also founded on the concept of the freemium model. As an internet browser, netscape is composed of a suite of software components for sharing, accessing, and communicating information via intranets and the internet.

• The “freemium concept is beneficial to the service providers and the users for the following reasons :
- Clients are acquired quite easily and fast enough because of the “free” or “give” away approach of the services offered.
- The model includes free services with an upsell to a premium level of service which is not very costly for the clients.
- There are little chances of hesitation to consume the services, because the user is not obliged to pay immediately.

However, the freemium concept has set-backs for example:
- Difficulties in connecting with users of the same service due to technical breakdowns, especially when it comes to long-distance communications .
- Although the services are said to be free, sometimes they may be “more expensive” than what is expected, basing on the definition of the concept of the freemium business model.