As a software vendor who wants to be benevolent, but not rip myself off, I really like this about Freemium: do “good” and “well” at the same time.
(see links to pg's "be good" at the end)
But for selling software, if you were truly benevolent, wouldn't you give it all away for free? Denying people who can't pay reduces the good you are doing - doesn't it?
Maybe an answer is that there's nothing wrong when people pay - because then they do get the value you created. It's only an issue when people cannot pay, and you deny them, because it's only in that case that your potential for doing good is unfulfilled.
I think the latter case only happens when (1) your prices are too high for the value particular users get from your software; or (2) too high for their wallet.
I think the solution to the first problem is to price your software (roughly) in proportion to the value customers get from it. E.g. "per seat" or "per server" or "volume-base" pricing does this. It's better to under-price than overprice (in reality, there's a huge range of values that customers get from a product, some get much more value from it than others - if you price too low, some get a fantastic bargain; too high, and you deny some).
For the second problem, some kind of charity version is appropriate, where you give it away to someone who just can't afford to pay for the value they would get from it. e.g. student versions. In economic theory, a loan would probably be appropriate; but a gift is nicer and simpler.
These problems become simple if your software actually helps people earn or save money themselves - then it's a non-issue that they can and should pay for it.
I did not intend to attack your character only your argument. It seems like few people really understand which business models work well with each type of software / service. Freemium works well when you have a huge audience that you can serve cheaply but you only provide a modest benefit to. Like over the air TV / Radio, but you also need a premium service tier.
Most Movie theaters use a similar model where they make little money on the tickets and most of their revenue from the concession stands. Consultants can use the razorblades model where they will give you a free "consultation" and then charge to fix the problem. But it's hard to scale as they have limited space and high cost's for the initial transaction.
So what defines a good freemuium model is having a useful second tier of service and a vary cheep to serve lower level. A good example of this would be an online resume builder with a lot of templates and a paid review service. The fact a movie theater shows movies is not their business their business is setting people up to overpay on food ditto for our online resume review system. But, the movie studio's want their cut so movie theaters need to charge for tickets even if they are not making money from this.
My argument also wasn't intended as a strawman, so I don't really understand how your initial reply relates to my comment. Though I think we're probably just talking at cross-purposes, as I'm discussing "being good" while you're talking freemium.
BTW: TV/radio is ad-supported. PayTV has apparently not worked out as a good business.
Interesting your point about the cinema concession stand - though there's also student discount tickets; and "gold-class" premium seating (here in Australia, anyway).
I didn't think you were attacking my character - I thought you were saying that my argument was so weak that it was a straw man argument, erected only be knocked down. I replied that your cynicism about my motives was misplaced. And it is.
Since you haven't made any connection between your follow-up and the issues I was raising, I'm assuming there isn't one. You were just posting.
To "set up a straw man," one describes a position that superficially resembles an opponent's actual view, yet is easier to refute. Then, one attributes that position to the opponent. from http://en.wikipedia.org/wiki/Straw_man
"As a software vendor who wants to be benevolent, but not rip myself off, I really like this about Freemium: do “good” and “well” at the same time.
...
But for selling software, if you were truly benevolent, wouldn't you give it all away for free?
...
I think the solution to the first problem is to price your software (roughly) in proportion to the value customers get from it."
I was trying to say you misrepresented freemium by describing the reasons to use it in terms of social good. A totally ruthless business person may decide to use it because it let's them maximize their profit. Giving away service for less than their cost to the company is all about building or maintaining market share which is why it can be illegal for monopolies to under price their services in the US.
Anyway, their are plenty of models that involve giving away services Drug dealer giving away the first hit, TV / Radio. However, it's only Freemium if you have a built in connection to better service level and keep offering the free service. A Photo sharing site that only let's people download your pictures 100 times an hour before you had to pay would be a freemium service. If using freemium makes you more money than charging people for that level of service how does that fit into social good? I mean you make more money and people who don't pay get a free service what's not to like?
PS: It's easy to use a straw man argument without intending to. Just be careful when you start describing or defining what something really means or what it's benefits are because you can easily overlook what it's about and have a long essay that misses the point.
I wasn't defining Freemium; just using it as a jumping off point for talking about social good (because the blog author mentioned "do good" and "do well").
I'm concerned about social good, for the reasons pg discusses (morale, confidence, people want to help you). It feels good to do good. That's my topic. Freemium is not my topic.
I agree that Freemium could be used by a "totally ruthless business person" - but that explicitly isn't the case I was talking about (though evidently not sufficiently explicit).
Therefore, you aren't addressing the part of my comment that I'm interested in - that's because you saw it as trying to define Freemium in a way you disagree with. Maybe I could have been clearer that I wasn't defining Freemium. Actually, I consciously chose the qualification "But for selling software" to distinguish my subject from Freemium - I happily concede that this qualification may have been inadequate to the purpose. Maybe also I shouldn't post that in a comment on an article about Freemium - but the article also was about doing good and doing well, so there is a relation - though clearly not the one you expected. BTW what you say about Freemium seems pretty reasonably to me from my wider reading, although I don't take a position on what it is or isn't; I'm not arguing that.
At the moment, the issue of doing good is very important to me, personally, and I can't afford to let it slip away. If my topic wasn't wasn't so important to me, I would happily switch to your topic (definition of Freemium) and discuss that.
PS: That also explains why you give advise me to be careful when I start describing or defining what something really means or what it's benefits are - it's because you thought I was doing that. I wasn't.
But for selling software, if you were truly benevolent, wouldn't you give it all away for free? Denying people who can't pay reduces the good you are doing - doesn't it?
Maybe an answer is that there's nothing wrong when people pay - because then they do get the value you created. It's only an issue when people cannot pay, and you deny them, because it's only in that case that your potential for doing good is unfulfilled.
I think the latter case only happens when (1) your prices are too high for the value particular users get from your software; or (2) too high for their wallet.
I think the solution to the first problem is to price your software (roughly) in proportion to the value customers get from it. E.g. "per seat" or "per server" or "volume-base" pricing does this. It's better to under-price than overprice (in reality, there's a huge range of values that customers get from a product, some get much more value from it than others - if you price too low, some get a fantastic bargain; too high, and you deny some).
For the second problem, some kind of charity version is appropriate, where you give it away to someone who just can't afford to pay for the value they would get from it. e.g. student versions. In economic theory, a loan would probably be appropriate; but a gift is nicer and simpler.
These problems become simple if your software actually helps people earn or save money themselves - then it's a non-issue that they can and should pay for it.
essay: http://paulgraham.com/good.html
video: http://www.omnisio.com/startupschool08/paul-graham-at-startu...)