Freemium business model

From Wikipedia, the free encyclopedia

The freemium business model works by offering basic services for free, while charging a premium for advanced or special features. The word freemium is a portmanteau created by combining the two aspects of the business model: free + premium[1]. The business model has gained popularity with Web 2.0 companies[2].

Contents

The freemium business model was first articulated by venture capitalist Fred Wilson on March 23, 2006:[3]

"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."

After describing the business model, Wilson asked for suggestions as to what to call it. Within a matter of hours, over 30 name suggestions were given by his blog readers. One such suggestion came from Jarid Lukin of Alacra, one of Wilson's portfolio companies. Lukin coined the term "freemium" and Wilson and his audience adopted it for the business model:[4]. The term has since appeared in Wired Magazine and Business 2.0, and has been used by prominent bloggers such as Chris Anderson and Tom Evslin.


  1. ^ Wordspy Freemium (2006-06-06).
  2. ^ A Business Model VCs Love. Business 2.0 (2006-10-01).
  3. ^ The Freemium Business Model. A VC Blog (2006-03-26).
  4. ^ Jarid Lukin's LinkedIn Profile.

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