Succeeding with Freemium - Sean Ellis

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In recent years freemium has become a leading startup business model. Startups use the pricing model to disrupt existing categories or to prevent a future competitor from disrupting them. But …

In recent years freemium has become a leading startup business model. Startups use the pricing model to disrupt existing categories or to prevent a future competitor from disrupting them. But freemium is a difficult model to execute and requires a unique growth strategy. In this session, Sean will share lessons learned from helping to launch and/or grow 15 freemium businesses that are now collectively worth billions of dollars.

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  • Highly defensible growth engine Requires unique culture (not common in established companies – startups malleable)Not easy to execute – today we’ll talk about best practices.
  • Product driven – free has to be good enough to create evangelists; paid needs to be noticeably better…
  • LogMeIn examples…Intended use case – free remote access creates need for paid version to print remote doc (especially if app doesn’t exist locally)Unintended use case – 2 problems… 1) setup time consuming 2) fear of re-accessSkype example – free conf – join via phone…
  • Minimum feature set to solve key problem

Transcript

  • 1. Succeeding with Freemium
    Sean Ellis
    July 14th, 2011
    Founder & CEO of CatchFree
    Blog: Startup-Marketing.com
    Twitter: @SeanEllis
  • 2. Competing Against Free…
    Hope nobody discovers free guy?
    Spend heavily on marketing?
    HBR “counter with free version”
    2
  • 3. Agenda
    Path to Freemium
    The Freemium Loop
    Freemium culture is critical
    Free/paid breakdown
    Marketing a freemium service
    3
  • 4. 2003 - 2007
    4
    Entrenched 800 lbs guerilla
    Great product/marketing
    Disrupt/diff with freemium
    Cashflow positive growth
    $1B-ish on NASDAQ
  • 5. Google Search Volume 5 Years
  • 6. 6
    Xobni
    Dropbox
    Eventbrite
    Lookout
    Socialcast
    2008 - 2009
  • 7. The Freemium Growth Loop
    7
    Reinvest
    Premium Upgrade
    Seed a
    Free User
    Get word-of-mouth free users
  • 8. Freemium Culture
    Least recognized necessity
    Passion to spread “experience”
    Patience to seed
    Freeloaders are good
    Protect culture – greed kills growth
    8
  • 9. Free/Paid Breakdown
    Free Version
    Premium Version
    Experience creates evangelist
    Evangelists drive growth
    Build relationship
    Free creates need for premium
    Understand needs
    Solve problems with premium
    9
    Experience
    Relationship
    Understand
    Solve
  • 10. Free is the MVP
    Lowers complexity barrier
    Lowers support cost
    More version differentiation
    10
  • 11. Marketing Freemium
    Promote free version
    Evangelists for free version
    Revenue per 100 users
    Allowable acquisition cost (less marginal cost)
    11
  • 12. The Freemium Growth Loop
    12
    Reinvest
    Premium Upgrade
    Seed a
    Free User
    Get word-of-mouth free users
  • 13. Channel Discovery
    Works with freemium economics
    Addresses skepticism
    Leverage good-will asset
    Seeds freemium growth loop
    13
  • 14. 14
  • 15. Sean Ellis, Founder & CEO
    CatchFree.com
    Blog: Startup-Marketing.com
    Twitter: @SeanEllis