What Google Can Teach You About Freemium Services

The 2010 Google I/O developer conference may have passed back in May, but Google just posted a recap of the event’s “Making Freemium work - converting free users to paying customers” panel discussion. An impressive lineup of venture capitalists sat down and explained how to make millions by giving services away. Here’s some takeaways for MSPs.

Google’s Don Dodge, who moderated the panel, has a video of the full hour-long I/O session, and it’s well worth a watch if freemium is something you want to know more about. For those not in the know, “freemium” refers to a business model where you give away basic services at no cost, and then offer premium services at, well, a premium.

The panelists included Brad Feld (Foundry Group), Dave McClure (500 Startups), Jeff Clavier (SoftTech VC), Matt Holleran (Emergence Capital) and Joe Kraus (Google Ventures).

Some key points from their discussion for service providers:

  • Customers will probably pay more for services than you think they will -- and when they do make the plunge into premium, they’ll often opt for more than they need. Think of how you buy a cell phone service plan.
  • Freemium works best when you’re set up such that the service is more valuable the more people are using it -- a little tricky in the managed services space, but not impossible.
  • Be flexible with your business model. Test several freemium scenarios and see what works best.
  • Collect usage statistics as you can - they’ll help tell you what
MSPmentor has long been watching the development of freemium as an IT service provider business model, and now we have some fairly authoritative figures in the IT space backing the idea up.

We expect the freemium trend to continue at this week's CompTIA Breakaway conference. Listen closely for separate news announcements from N-able and Own Web Now, respectively, two vocal freemium proponents.

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