freemium: what's hot? what's not?
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FreemiumWhat’s Hot? What’s Not?Wix Developers Meetup, Parisoma, San Francisco, December 18th, 2013
ANGELA HEY, TECHVISER
@AMHEY ANGEL AHEY.COM
@TECHVISER TECHVISER.COM
AMHEY@TECHVISER.COM
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What’s Hot? What’s Not?
What Is Freemium?
Why Offer Freemium
Pricing?
What Do You Price?
How Much Do You Charge?
Which Designs Work Well?
How Will You Fund Your Business?
3
What Is Freemium Pricing?
Free +
Premium
Source Price Chart: www.eventscream.com/blog/pricing
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Is Freemium Good For You?
If a company segments the market and
understands who will pay, why waste
resources on freeloaders?
Get traction with free users, when there are
millions we’ll give you a term sheet
5
Freemium - Pros
JanFe
bM
arApr
May
Jun JulAug
Sep
Oct NovDec
0
5000
10000
15000
20000
25000
Fast User Acquisition
Free Paying - Pricing Tier 1Paying - Pricing Tier 2
‘000
s of
Use
rs
Free Users Promote
Gain Market Share Fast
Fast User Feedback
Meaningful Analytics
Qualified Paid Users
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Freemium - Cons Soaring Costs
Wasted Sales & Marketing Resources
Capital Requirements Dilute Founder Equity
Percentage of Users
Free Paying - Pricing Tier 1Paying - Pricing Tier 2
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Users Might Think… Buggy: “How Can They Even Charge For This?” Unsubscribe: “I Need To Delete This Upgrading To Premium” Crap: “This is very clunky!” Mailing: “All emails are getting sent to spam folders and not
even delivered to Outlook.com!!!!” Common Ninja on Facebook: “Both Wix's app and Ninja
websites are separated, meaning, if you're premium in one of them is not necessarily that you're premium in the other one. Those are also 2 different accounts.”
Source: Wix App Market, Common Ninja’s Facebook Page
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The Right PriceWHAT WILL USERS PAY FOR?
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Who Pays For Mobile Games?
Source: Flurry = Posted by Jeferson Valadares on Fri, Sep 16, 2011
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Charge For Quantity Userso Contactso Simultaneous Users
Systemo Bandwidtho File Storage
Resourceso Pictureso Files Uploaded
Timeo Real Time Updateso Length Of Audio/Video
FinancialoMaximum Transaction AmountoMaximum TransferredoMaximum Stored
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Charge For Design Customizationo Designer templateso User can edit CSS fileso Choice of colorso Choice of headers, backgrounds
Globalizationo Languageso Culture aware graphicso Foreign currency support
Brandingo User logoo Remove software developer logo
Advertisingo Remove ads
Enterprise Saleso Make it their product - White label
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Charge For Interfaces Import and Export Social Media Integration Message Routing Format Conversion
Source: Jorge Calvo - SensationalFix.com Flat Icons © SensationalFix
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Charge For Reports And Stats
Reportso User Reportso Admin Reportso Automatic Reportso Messageso Emails, RSS Feedso Newsletters
Charts, Graphso Social Networkso Interest Networks Hoto Trends
Statso Analyticso User Cohort Analysiso Forecasts, Predictionso Segmentation
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Charge For Timeliness
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Charge For Attracting Users Coupons Gift Cards Developer Advertises Customer Site
Featured Site, Site Of The Month Integration With Ad Network
Affiliates Affiliate Component For Website Developer Attracts Affiliates Who Can
Market User’s Site
Link Bait Humorous Web Elements Personalized Links
Source: Coupons.com
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Average Price $6.73/Month
0%
10%
20%
30%
40%
50%
60%
Wix Market Users (Sample Size 60 Apps)
Source: Wix App Market and Techviser
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DesignWHAT MAKES A GOOD DESIGN?
(REALIZING WIX APP MARKET HAS STANDARD DESIGN)
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Do You Display Free Option?
Source: 123ContactForm.com
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Most Expensive On Left
HOT• Put Free Version On Right• Free Trial
NOT HOT• Showing Free Version• Enterprise Likes Price Too
Source: Bookfresh
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Increase Sales, Free On Right
Source: Wufoo.com – form building app
Hot
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Maybe You Don’t Display Free
Hot
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Annual or Monthly Fee?
Source: Ecwid
HOT• Showing Best Value• Annual Plan For Business
NOT HOT• Poor Contrast• Repetitive Wording• Lowest Cost On Left
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Pictures?
etc., etc., etc., etc., etc.
NOT HOT• Pictures Confuse• Too Many Checklists• Most Features In All Versions• Price At Bottom Of Long Table
Source: Pnyxe
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HOT• 4 Tiers• Colors• Premium Image –
No Bronze
NOT HOT• Too Long• Headings Waste
Rows• Too Many Features
and Categories
Less IsMore
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Simple – Call To Action
HOT• Concise• Common Features
Below• Clear Differences
NOT HOT• Color• “Please”…weak?
Source: Maverick.appforma.com – Maverick an Appforma Ltd. Brand
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Live Agent Hot
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Free Trial
HOT• Free Trial• No Credit Card For Trial
NOT HOT• Poor Contrast• Features Hard To Read –
Crossed Out
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Example – Google Apps
Source: Google
HOT• $5 Not $4.99• $50/Year – Discount• Vault – Security
NOT• Free for non-profits
and education, buried in FAQ
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Example - Wix
HOT• Lower priced options
on right• No free option
shown• Clear feature list
NOT• Too much space for
prices• Gift voucher buried
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Wix App Market – Features
Source: Wix Marketplace
• Wix Pricing Is Different From Company Website• Oversized – Users Have To Scroll
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Wix App MarketDesign
Source: Wix App Market
HOT• Uniform View For All Apps• Simple• Colors
NOT HOT• User Has To Scroll• Only One Pricing Level• No Annual Fee At Top
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Feature Diffs – Top or Bottom?BOTTOM NOT TOP HOT
Source: Wix App Market
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Funding SourcesOTHER PLACES TO GET MONEY
35
Other Revenue and Asset Sources Goods Affiliate Programs Data Corporate Customers Channel Partners Adverts
Code – Open Source Artwork
36
Trend – In App Purchases
Amazon Appstore Apple iPhone Apple iPad Google Play0
5
10
15
20
Number of Apps In Top 20 With In-App Purchases
Free Paid Top Grossing
App Stores
Num
ber o
f App
s Out
Of 2
0
HOT• Despite HTML5
Growth Apps Are Still Hot
37
Can You Afford Free?
HOT• Free Entry Level
Experience
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Dropbox Evernote HootSuite (+$3M debt)
LinkedIn Pandora SurveyMonkey (+$450M debt)
Angel and Pre-VC 1.2 9 NaN NaN NaN NaN
Series A 6 6.5 1.9 4.7 1.5 65
Series B 250 10 185 10 7.8 450
Series C NaN 70 NaN 12.8 12 NaN
Series D NaN 91.3 NaN 53 35 NaN
Other NaN 63.8 NaN 119.5 NaN NaN
50
150
250
350
450
550
Angel and Pre-VC Series A Series B Series C Series D Other
$M F
undi
ng
Source: Crunchbase and Techviser – note some venture rounds were addedto a Series Round if they came in between rounds
HOT• Capital EfficiencyRARE• Big VC Rounds
Is It Worth Chasing Venture Funding?
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Take Aways
Set Goals
Identify And Test Items To Monetize
Quality Design
Validate Funding Sources
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Further References
http://onstartups.com/tabid/3339/bid/84427/Freemium-Pricing-for-SaaS-Optimizing-Paid-Conversion-Upgrades.aspx - has examples of good designs
http://visualwebsiteoptimizer.com/split-testing-blog/ab-testing-free-trial-versus-freemium/ -giving up freemium model increased paid signups by 268.14% for Acuity Scheduling
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