The Best Internet Business Model is… Freemiums!
By Anna Johnson on May 26th, 2009TechCrunch published an article by MG Siegler on the weekend that pretty much concluded that the ‘freemium’ business model is the way to go for most Internet businesses.
The ‘freemium’ model is effectively what many, if not most, niche Internet marketers already do: offer a free version of their products or services and a premium, paid version.
The free products could be anything from an email newsletter, to a mini-course, to free videos, audios, reports or ebooks, limited versions or trial periods or software, and the list goes on.
The premium products could be advanced versions of the above or other kinds of products or services entirely – again, everything from home study courses to consulting services – for which people must pay.
What’s so special about the freemium business model? Well, in a throw-back to the dotcom crash at the turn of the century, it seems that many of the ‘web 2.0′ Internet businesses have learned, or are learning, that the advertising-based, free content model isn’t broadly sustainable.
So, unless you are, um, like TechCrunch, you just can’t rely on advertisers, alone, to subsidize your Internet business.
MG Siegler makes an interesting point, however, that may be something for Internet marketers to think about. He suggests that rather than launching with the freemium model to begin with, Internet businesses should aim to attract a large and loyal user base first.
Siegler mentions Twitter as an example of an Internet business which is likely to prosper from this approach (last year Twitter announced that it would introduce premium, paid-for services, although no-one knows exactly what these will be yet…).
I agree. After all, according to some Internet marketers – well known and not-so-well known – Twitter is making them money. Presumably they’d be willing to pay for an enhanced version. Heck, if some of the claims I hear are true, they should be willing to pay for the service as it is now.
In the article MG Siegler also lists some sites he currently pays for, along with some sites he would be willing to pay for. Google probably hopes that more people would agree with MG about YouTube. Unless it can acquire some seriously hot and highly popular and exclusive content, YouTube faces an uphill battle to make an advertising-only model pay.
As we recently discussed in Kikabink News, most of YouTube’s content gets hardly any views and is unlikely to generate much interest (or sponsorship) from the kind of big-brand advertisers it would need to make enough money from advertising alone.
No question, YouTube has made some changes to be more ‘mainstream’ and advertiser friendly, including signing a content deal with major U.S. television network, CBS. It looks to have been one-upped in the content (and advertiser attraction) stakes by Hulu, however, which is part-owned and able to deliver the content of the other major U.S. networks, NBC, Fox and ABC.
But I wonder, wouldn’t people – especially Internet marketers – be willing to pay YouTube an annual fee to, for example, upload their videos? YouTube has proven its value… it’s extremely popular… so couldn’t Google for it.
You may not like the idea of paying for YouTube to host your videos… but wouldn’t that be better than see YouTube either go out of business, or continue along its current path of quietly favoring ‘professional’ video producers over the amateur or semi-amateur video producers that made it so great?
In any case, MB Siegler is on the money, and, ultimately, seeing more Internet businesses charge for their content and services will probably be a good thing for Internet marketers in general. It will help consumers not only appreciate, but pay for, the value they get online.
Source: MG Siegler, “Free To Use. Pay To Play,” TechCrunch, May 23, 2009
