Free, paid and freemium in consumer internet

Edited excerpt from The First Law Of Internet Physics by Fred Wilson:

I’ve seen so many people try paid content on the Internet and the result is fewer users, a lot fewer. You can extract a higher average revenue per user (ARPU) from a paid model, but you get so many fewer users that it’s better to extract a lower ARPU with a free model and get many more users.

The rule: many users * low arpu >>>> few users * high arpu

I guess a corollary is that you can implement a freemium model on top of a free model and turn some of your users into high ARPU customers, but they will always be a small portion of the total number of users.

That’s a long way of saying that you can do paid, but you had better have a free tier first and foremost as most users will go for that. And if you put too much of your content behind a paywall, you’ve effectively turned your core product into a paid one and you are back to {few users*high ARPU}. So be careful with the freemium offering.

One thought on “Free, paid and freemium in consumer internet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s