There are tons of great things out in the tech world right now that are free: social networking sites, productivity apps, games, and music sites are all jumping on the bandwagon. What exactly is freemium, and how does a business plan like this ever expect to make money? Freemium is a portmanteau of “free” and “premium,” and is a marketing model based on the idea of charging absolutely nothing for a basic product or service — and the Android and iPhone app stores are filled with them.
Some of your favorite apps for your smartphone or tablet device are based upon the freemium model. Facebook, Skype, Dropbox, Evernote, and Angry Birds all have free versions of their product, but then you begin to wonder: how do any of these products make money if they’re completely free? The answer: they make money by offering a premium or full version of the product with advanced functionality, and people will pay for the upgrade.
“The easiest way to get 1 million people paying is to get 1 billion people using.” — Phil Libin, CEO of Evernote
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