Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

June 2022

FREEMIUM BUSINESS MODEL

By Namrata Shah
Chartered Accountant
Reading Time 7 mins
INTRODUCTION
The term ‘freemium’ is coined by combining the words ‘free’ and ‘premium’. Over the last decade, this business model has become a dominant business model among internet start-ups and smartphone app developers.
Venture capitalist Fred Wilson was the first to describe the Freemium business model back in 2006. He summarized the pattern as follows: ‘Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value-added services or an enhanced version of your service to your customer base.’ The term’s coinage goes back to a post that Wilson put on his blog calling for a fitting name for this business model. ‘Freemium’ was chosen as the most appropriate term and has since become firmly established. In the freemium business model, the users get basic features of the product at no cost and can access the richer functionality of the product for a subscription fee. The basic version of an offering is given away for free to eventually persuade the customers to pay for the premium version. The free offering can attract the highest volume of customers possible for the company. The generally smaller volume of paying ‘premium customers’ generates the revenue, which also cro
Read More
Download PDF

You May Also Like

AMENDMENTS IN THE CHARTERED ACCOUNTANTS ACT

MLI SERIES MLI ASPECTS IMPACTING TAXATION OF CROSS-BORDER DIVIDENDS