Dynamic Web Solutions

The Freemium revenue model for web services is in essence an extension of the free trial. Sites like Pandora and Flickr have used this model as a supplemental revenue source. Freemium allows consumers to use a basic version of a web service for free, paid users get the added utility of an extended feature set. Most sites, like Pandora, allow paid users to remove advertisements in addition to the upgraded feature set. Pandora is on target to make around $40 million in revenue from its primary model of ad inventory sales. Pandora’s 10 million monthly users could generate a substantial amount of  additional income if just a small percentage opt in to the paid service option. Even at a meager $25 per year and a 2% user participation the company would be generating an additional $50 million in revenue.

The Freemium model is great for companies that have a stellar product. The better the offering, the more users will opt to pay for ad removal and additional features. One sector in particular that could benefit from employing this tactic is the News Industry. Already most news sites give up recent content for free, but require paid subscriptions to view archived content. I’d like to see the feature division between the two widen. News papers should allow paid users to interact with reporters, remove ads, and customize the content they see based on interests. If they did, in addition to offering great content, they could find away out of their financial issues. These companies need to look to the web to generate income, as more and more print news sources are being dissolved.

Free trials are great, but Freemium has the added benefit of keeping the users who like the service but won’t pay for it trafficking the site and viewing ads ($$$). Until someone finds a better way to monetize the internet, Freemium seems like a sure bet for great sites to generate revenue.