Sunday, April 26, 2009

Freemium: What would consumers pay for

Freemium business model seems an appropriate way to attract people to a service, while trying to make the business sustainable/profitable. However, what aspect of the service would somebody pay for?

From a service provider perspective, getting your audience to become subscriber is preferred. Event-based premium content (akin to pay-per-view) is a good bridge to get from the free world to the subscription world.

What kind of events would somebody pay for? One of my friends has been working on trying these models for a couple of years now. He said live data is the key. As a consumer I can relate to it. Live data can be multi-faceted:
  • Get access to information/event before others. Data services for businesses have been doing this for a while now.
  • Experience an event while on the run/road. Popularity of smart phones is driving this category. A significant portion of the billion Appstore downloads are of this segment.
There might be related information for which folks would pay for:
  • Inform when a friend/contact is in the vicinity
  • Event of interest taking place in the vicinity
The above is a pull-push model. Based on personal filter settings (static data) and location details (dynamic data), the consumer 'pulls' events of interest (primarily in the personal/social space).

Prima facie, a service that can take advantage of the above triggers would require:
  • Support for mobile devices, as the above use cases involve user mobility
  • Sophisticated push engine: The success of BlackBerry service was based on their push model. If the guy pulls something, chances are that he wouldn't pay for it!
  • Micro-payments: Each of these events are atomic, and paid for prior to consumption
  • 1-click / Integrated payments: Make it easy for the consumer to get to what they want
The Apple Appstore is turning out to be a platform where interesting experiments are being tried as folks figure out a way for consumers to pay for services (more about this in another blog).

While on the topic of what consumers would pay for, would they pay for:
  • Identity: Would a parent pay to ensure that adults don't participate in kids conversations (for e.g., at a chat room)?
  • Security: The site must be secure, and that the information you share with the service is secure. To most people, this sounds like hygiene and should be covered by the service provider
What are your thoughts? Love to hear from you.

PS: Advertising revenues from businesses targeting the audience of the service is assumed to be a source of revenue.

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