Freemium ain’t new
It’s just a new word
Matt Brezina
Co-founder, Xobni
Twitter: @brezina
http://www.mattbrezina.com/blog

efax (J2 Com) 1B market cap
• 9,9M free users
• 1.2M premium users

Skype 1.9B market cap
efax (J2 Com) 1B market cap • 27B free min
• 9,9M free users • 3.1B premium min
• 1.2M premium users

Skype 1.9B market cap
efax (J2 Com) 1B market cap • 27B free min
• 9,9M free users • 3.1B premium min
• 1.2M premium users
LogMeIn 450M market cap
• 300k premium users
• 27M total registered users

10:1

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Free - the most powerful word
in marketing

Free - the most powerful word
in marketing
• Freemium is a marketing strategy

Free - the most powerful word
in marketing
• Freemium is a marketing strategy
• Powerful because of the “penny gap.”

1. Is freemium right for my business?

1. Is freemium right for my business?
2. If it is, how do I make it successful
(lessons learned from Xobni)

If you make software, you can make
money in four ways
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

Is freemium right for my business?
(let’s narrow discussion to freemium vs. premium only)

When freemium makes more sense
than premium-only

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects
✓ Cost to offer free service isn’t too high

When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects
✓ Cost to offer free service isn’t too high
✓ You can get $ to build free product

How to make freemium a success
(lessons learned from Xobni)

How to make freemium a success
(lessons learned from Xobni)
Paul Buchheit:
advice = limited life experience + overgeneralization

Why did we go freemium with Xobni?

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user
✓ Access to VC funds

Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user
✓ Access to VC funds
✓ We didn’t want to sell enterprise
software

Xobni Plus

Xobni Plus Xobni for Blackberry

Xobni Plus Xobni for Blackberry
Xobni One

Xobni Plus Xobni for Blackberry
Xobni Enterprise
Xobni One

Xobni Free
for Outlook

Xobni Free
for Outlook

Free Premium
Xobni Free
for Outlook

Free Premium
Xobni
Plus
Xobni Free $29.95
for Outlook

Free Premium
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

Free Premium
Xobni
Blackberry
$9.99
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

Free Premium
Xobni
Blackberry
$9.99
Xobni One
$3.99/mo
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

Free Premium
Xobni
Blackberry
$9.99
Xobni One
$3.99/mo
New
mobile &
email
Xobni
platforms
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

8 Lessons learned in building Xobni’s
freemium business

1. Survey!
One huge advantage of free - you’ve got a lot of users
to talk to
Decisions we made because we understood our users:
• Deployed by IT? Our policy doesn’t allow
deployment without Xobni Enterprise
• One or multiple computers? Extra Xobni plus
licenses are $9.95

2. Start with more in-product upsells
than you are comfortable with
• See what users are clicking on
• Determine which upsells convert to sales
• Improve or remove

Over 14 in-product upsells

3. Tease with data
Show the user what they are missing from
your premium product

Why should I click that button?

Tease with data
Text

4. Tie message to the user’s action
If the user tells you he wants apples, don’t
sell oranges

I clicked Video
So, sell me video!

User clicks on autosuggest
We sell them autosuggest

5. Obviously, A/B test
• High volume in freemium businesses makes
a/b testing more important than ever
• We got 50% improvement in premium
conversion by a/b testing our in-product
upsells and messages

25% improvement on this upsell

6. Not all channels are created equal
(and that can be okay)

7. Users conditioned to free product
convert poorly to premium
• Existing free users converted poorly when
we launched premium
• New users that only see Xobni Free when
installing convert poorly

Users that see a homepage with only our free product

Convert to premium more poorly than users who see
both free and premium initially

8. Free trials are the freemium business’s
best friend
Cost of losing X is perceived higher than the
value of gaining X

1B market cap 1.9B market cap
450M market cap

1B market cap 1.9B market cap
450M market cap
Time will tell...

Freemium ain’t new
It’s just a new word
Matt Brezina
Co-founder, Xobni
Twitter: @brezina
http://www.mattbrezina.com/blog