Chris Anderson "Gets" Freemium Business Model

There has been a lot of attention this week on an article called Free! Why $0.00 Is the Future of Business published by Chris Anderson in Wired Magazine. It is an excellent overview of the drivers behind the important trend of companies offering free versions of their products. He plans to release a full book on the subject next year.  For those who aren’t familiar with Chris Anderson, he’s the author of The Long Tail, a book that kicked off a frenzy among internet entrepreneurs and VCs a couple of years ago. It highlighted the impact of unlimited online shelf space.

Every time I start reading this “Free…” article I interrupt myself to write down more thoughts on free business models.  It’s bringing back years of thinking about the best ways to execute these models.  In fact I’ve spent most of the last 13 years in the “free” space.  I plan over the next few weeks to make several “brain dump” blog posts on the subject.

A quick recap of my specific experiences with free business models.  In 1995 I made an angel investment in a “free” company call Uproar.com.  When the service neared launch in mid 1996, I joined full time as VP Marketing.  Our business model was to require users to complete a detailed registration form to be able to win cash and prizes in “free” online game shows.  We used this detailed registration information to target advertising.  While “free games for cash and prizes” was the hook, we created a very sticky site through community and a great game playing experience.  Ultimately this free online experience combined with a systematic approach to customer acquisition propelled the site to the 8th biggest web property worldwide in terms of total usage time (a key metric for ad supported websites).  Uproar was acquired by Vivendi Universal in 2001 for $140 million but the bubble valuation peaked at about $1 billion.

From March 2003 until Dec 2007 I led marketing for a more classic “fremium” service called LogMeIn.  For confidentiality reasons I won’t go into details about the executing the model, but the LogMeIn home page states the service has “Over 30 million devices connected worldwide for remote support, access & backup”.

Through both opportunities I gained lots of insight in executing this model.  I especially learned that, in a competitive category, it’s much better to be the fremium player than the premium only player.