Make it free or fail

2 January 2011

As a project manager, I’ve seen the freemium model become increasingly popular in the software development community. The idea is simple: offer a basic version of your product for free, and then charge for premium features or additional functionality. This model has worked well for some companies, but I believe it’s a risky proposition for most startups.

Here are a few reasons why:

It’s difficult to attract enough users to generate a reliable revenue stream. In the crowded app and webapp space, it’s getting harder and harder to stand out from the crowd. Even if you do manage to attract a large number of users, it’s no guarantee that they’ll be willing to pay for your premium features. It’s difficult to get users to upgrade to a premium plan. Once users have gotten used to getting your product for free, they may be reluctant to pay for it, even if they’re getting a lot of value from it. It’s difficult to provide good customer support. When you have a large number of free users, it can be difficult to provide them with the level of customer support they need. This can lead to negative reviews and a poor user experience. I believe that startups are better off focusing on building a fantastic product and charging for it. This may seem counterintuitive, but it’s actually the best way to ensure long-term success.

When you charge for your product, you immediately validate its worth. You also get valuable feedback from paying users, who are more likely to care about the product’s success. And finally, charging for your product gives you a reliable revenue stream that you can use to reinvest in the product and grow your business.

If you’re considering using the freemium model, I encourage you to carefully weigh the risks and benefits before making a decision. But if you’re serious about building a successful software company, I recommend that you focus on building a great product and charging for it.