This is a slide deck I presented at Freemium Summit on March 26, 2010. An exploration of existing freemium businesses, business/market conditions where freemium can make sense, and finally some lessons learned from xobni

1. Freemium ain’t new
It’s just a new word
Matt Brezina
Co-founder, Xobni
Twitter: @brezina
http://www.mattbrezina.com/blog

3. efax (J2 Com) 1B market cap
• 9,9M free users
• 1.2M premium users

4. Skype 1.9B market cap
efax (J2 Com) 1B market cap • 27B free min
• 9,9M free users • 3.1B premium min
• 1.2M premium users

5. Skype 1.9B market cap
efax (J2 Com) 1B market cap • 27B free min
• 9,9M free users • 3.1B premium min
• 1.2M premium users
LogMeIn 450M market cap
• 300k premium users
• 27M total registered users

6. 10:1

8. $

9. $
$

10. $
$
$

11. Free - the most powerful word
in marketing

12. Free - the most powerful word
in marketing
• Freemium is a marketing strategy

13. Free - the most powerful word
in marketing
• Freemium is a marketing strategy
• Powerful because of the “penny gap.”

15. 1. Is freemium right for my business?

16. 1. Is freemium right for my business?
2. If it is, how do I make it successful
(lessons learned from Xobni)

17. If you make software, you can make
money in four ways
If you sell software to a business,
they don’t want you to make
money the last two ways

18. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
If you sell software to a business,
they don’t want you to make
money the last two ways

19. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
If you sell software to a business,
they don’t want you to make
money the last two ways

20. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
If you sell software to a business,
they don’t want you to make
money the last two ways

21. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

22. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

23. If you make software, you can make
money in four ways
• Sell your stuff (Premium only)
• Sell your stuff to some of your users (Freemium)
• Sell other companies’ stuff (Advertising)
• Sell users’ stuff (Data marketplace)
If you sell software to a business,
they don’t want you to make
money the last two ways

24. Is freemium right for my business?
(let’s narrow discussion to freemium vs. premium only)

25. When freemium makes more sense
than premium-only

26. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist

27. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive

28. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand

29. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects

30. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects
✓ Cost to offer free service isn’t too high

31. When freemium makes more sense
than premium-only
✓ A channel for buying users doesn’t exist
✓ Corollary: channels for buying users are too
expensive
✓ Premium-only competitor is creating demand
✓ Your product has (or needs) network effects
✓ Cost to offer free service isn’t too high
✓ You can get $ to build free product

32. How to make freemium a success
(lessons learned from Xobni)

33. How to make freemium a success
(lessons learned from Xobni)
Paul Buchheit:
advice = limited life experience + overgeneralization

34. Why did we go freemium with Xobni?

35. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?

36. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform

37. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users

38. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user

39. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user
✓ Access to VC funds

40. Why did we go freemium withwith Xobni?
Why did we go freemium Xobni?
✓ Good virality on communication
platform
✓ No existing cheap paths to buy
Outlook users
✓ Low marginal cost per user
✓ Access to VC funds
✓ We didn’t want to sell enterprise
software

43. Xobni Plus

44. Xobni Plus Xobni for Blackberry

45. Xobni Plus Xobni for Blackberry
Xobni One

46. Xobni Plus Xobni for Blackberry
Xobni Enterprise
Xobni One

47. Xobni Free
for Outlook

48. Xobni Free
for Outlook

49. Free Premium
Xobni Free
for Outlook

50. Free Premium
Xobni
Plus
Xobni Free $29.95
for Outlook

51. Free Premium
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

52. Free Premium
Xobni
Blackberry
$9.99
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

53. Free Premium
Xobni
Blackberry
$9.99
Xobni One
$3.99/mo
Xobni
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

54. Free Premium
Xobni
Blackberry
$9.99
Xobni One
$3.99/mo
New
mobile &
email
Xobni
platforms
Plus
Xobni Free $29.95
for Outlook Xobni
Enterprise
$36/user/yr

55. 8 Lessons learned in building Xobni’s
freemium business

56. 1. Survey!
One huge advantage of free - you’ve got a lot of users
to talk to
Decisions we made because we understood our users:
• Deployed by IT? Our policy doesn’t allow
deployment without Xobni Enterprise
• One or multiple computers? Extra Xobni plus
licenses are $9.95

57. 2. Start with more in-product upsells
than you are comfortable with
• See what users are clicking on
• Determine which upsells convert to sales
• Improve or remove

58. Over 14 in-product upsells

59. 3. Tease with data
Show the user what they are missing from
your premium product

60. Why should I click that button?

61. Tease with data
Text

62. 4. Tie message to the user’s action
If the user tells you he wants apples, don’t
sell oranges

63. I clicked Video
So, sell me video!

64. User clicks on autosuggest
We sell them autosuggest

65. 5. Obviously, A/B test
• High volume in freemium businesses makes
a/b testing more important than ever
• We got 50% improvement in premium
conversion by a/b testing our in-product
upsells and messages

66. 25% improvement on this upsell

67. 6. Not all channels are created equal
(and that can be okay)

68. 7. Users conditioned to free product
convert poorly to premium
• Existing free users converted poorly when
we launched premium
• New users that only see Xobni Free when
installing convert poorly

69. Users that see a homepage with only our free product

70. Convert to premium more poorly than users who see
both free and premium initially

71. 8. Free trials are the freemium business’s
best friend
Cost of losing X is perceived higher than the
value of gaining X

73. 1B market cap 1.9B market cap
450M market cap

74. 1B market cap 1.9B market cap
450M market cap
Time will tell...

75. Freemium ain’t new
It’s just a new word
Matt Brezina
Co-founder, Xobni
Twitter: @brezina
http://www.mattbrezina.com/blog