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Is the Freemium Model Dead?

October 6, 2008

/files/2008/10/free_sign_med.gifIs the Freemium business model dead?  It might be if you are looking to raise venture capital.  Fred Wilson is suggesting that there is a movement away from the Freemium approach, like it or not.  I first wrote about the Freemium business model back in 2006 in a post titled, “Fred Wilson’s Favorite Business Model“, defined as “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.”

Howard Lindzon, a Phoenix based investor, said it first, “freemium is dead” explaining that “free is over, I am only investing in services that customers pay for”.  Fred also pointed out that Roger Ehrenberg, another angel investor, has changed his approach to companies that employ the traditional freemium model.  Of course, Fred isn’t throwing in the towel, suggesting, “freemium is far from dead, in fact it may be the business model de rigueur.”

Ironically, ten hours before Fred suggested investors might be frustrated with the freemium model, Sam Huleatt suggested ‘Freemium is Sucking.’  My thought?  Take the fact that the tide may have turned, investors may associated a negative connotation with freemium business models - take this into account before pitching one.

Written by Alexander Muse · Filed Under Blog, Startups 

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