To freemium or not to freemium

I've been battling the question of freemium for a while and want to hear people's thoughts on this model.

Our project has been freemium for a while, but we are considering making it paid for only.

The way I see it, freemium works only if the product itself has lots of inherent shareability and social network effects. Our product does not because it focuses on individuals and is a private personal platform which users use by themselves, and produces content that users do not want to share, ie it's private stuff.

We figured that going to a paid model would reduce the number of sign ups, however many would still be prepared to pay a small fee for use.

What are your experiences of freemium and would love to hear stories where it worked for you and why, and those where freemium didn't work at all.

Evernote is inherently private, and while some of its features are shareable, it's about keeping private notes in a centralized location (at least it is for me). Evernote now has 150M users and @ 1% paid (it's much more), they'd be doing $35M a year in revenue. Pretty good as long as you can keep your costs down.

See this interview with the CEO : http://t.co/VGmbSDq52l

Freemium relies on the "pull" of the paid features to the intended user. The problem comes when the features of the free account are unbalanced (more valuable) or an unforseen use arises where lots of people who will never upgrade find a use for the basic features.

If your product is about sharing in small group then it's best if the freemium plan allows only public sharing so users have an incentive to pay.

Next step is to make sure that users who like sharing publicly don't sign up in the first place because they're not your target audience and public sharing can come with support headaches (think about copyright claims for example).

Does your pay-for plan already include a free trial period? Be it a week or month, it forces users to make a decision to upgrade. In my experience lots of users simply forget and reminders/ads don't work well as they can be ignored.

OK, one of my titles was Global Head of Freemium Channel, so here is my take:

1)I've never seen a freemium business reach above 15% paid users from total active base - if your economics cannot support this for a long time, get out right away. Most freemium business are roaches surviving on 1-5% conversions.

2) Freemium works best when:

- User has to urgently do something now that is limited (faster=paid, free= slow, those annoying download places that make you wait 1 min for each download or sign up to download now do make money of this simple fact)

- User finds content worth paying for in the sea of free content (NYT)

- User has low barriers to start, but would be hard to leave (e.g. upload photos) service

- User uses service, then gets to bill usage to others (e.g. malware software, document delivery, b2b stuff)

- User base can easily reach limits of free service and will require more eventually (e.g. data storage)

- User base can clearly be defined as amateur vs. professionals, and the professionals will need more features and pay (e.g. Wordpress plugins, Salesforce API apps, etc...)

- User base will be so large the business can be sustained with advertising (what most people want to build but ends up failing all the time - cant get done properly without a miracle)

My advice is start with the paid, always. It will give you a realistic conversion result + you can always go lower/free later. If some people already want to pay you, take their money! You might want to bill first, offer the freemium solution later via email to 'grow' truly interested users that would convert at some point. Freemium 'fools' a lot of business who do NOT track everything religiously.

The freemium business is fragile like a soufle, so when everything is perfect it works but when not, its an epic fail. Proceed with caution.