With the economy in such tough shape, with customers on the sidelines with no budget to buy software, maybe now is the perfect time to embrace a Freemium software strategy. This concept was originally proposed by a venture captialist named Fred Wilson, the founder of Union Square Ventures.
This became really clear to me over the past 6 months that this trend towards free software might be the future. Initially I read a great article entitled Free! is the Future in Wired magazine (make sure you watch the Chris Anderson video), which I thought presented a very clear argument for free.
Think of all of the free software and services business models that went bust during the Internet Boom. But then again there have been many businesses that were built using a free business model including Google, Yahoo!, Skype, eBay, and Craigslistjust to name a few. Some of the new kids on the freemium block include Facebook, LinkedIn, SimplyHired, Kijiji, 37signals and many of the open source software players.
My second realization of the power of free was using 37signals BaseCamp project management product. It was a great example of providing a free product that you liked so much that you had to buy into their paid version. If you need a project management tool, this one is worth a subscription and you may end up pulling out your credit card like me.
Then my third reason why I thought freemium could really be the future of software is based on working with a great company, MrTed, who makes Applicant Tracking or ATS software for large companies. MrTed just recently launched their new Small and Medium business freemium offering, SmartRecruiters, which is an Open SaaSproduct, which is a mashup of Open Source and SaaS business concepts. This Open SaaS model was developed by Jerome Ternynck MrTed’s CEO and founder. SmartRecruiters like many other freemium offerings is based on the development of a strong and passionate user community, who ultimately become the revenue engine for these companies. SmartRecruiters will monetize their business model by offering a collection of value-added services that are bundled with their free software.
As companies look at their 2009 business strategies, they need to balance gaining marketshare while keeping customer acquisition costs (CAC) as low as possible. By deploying a freemium software strategy now you might be considered crazy in 2009 but be laughing all the way in the not too distant future.