Freemium is a crutch, not a business model

We've said it over, and over .... again, even at Web 2.0 conferences and SXSW, and we've railed against others who say it is - but here are some other smart guys who note that Freemium is not a business model - the arguments are very well made in this paper> They are talking mainly about SaaS but it applies more generally - here are the key points:

• Freemium, while having both free and premium components, is most popular and well-known
for the free portion
• Free is not a Business or Revenue Model; money has to come from somewhere
• Free is not a revenue stream (obviously)
• Free is a tactic within an overall marketing strategy
• Free is a marketing tactic that can hurt a brand / market position if not handled carefully
• Free trials or “Try before you buy” are fine, and expected, but free in perpetuity, like
Freemium, has potentially negative consequences
• Many times "free" is a cop-out allowing a vendor to avoid asking for money or having to
“sell” ("we'll figure out how to monetize later...” or “we just need people in the system to bang
around; get them in and we’ll up-sell later” or “we’ll build the product, raise money, and then
hire a sales and marketing person”)
• Freemium is usually found in startups; rarely do existing companies wanting to bring a SaaS
product to market default to Freemium
• Free users should not be considered Customers since they do not pay

Or as we put it in this essay, in The Limits to Freeconomics Part IV, if you ain't paying, you ain't a customer!. It is fine as a way of getting going and making market inroad in the very early stages (a marketing tactic, as noted above), but its very risky to get hooked on it as a model.

Hat tip to ZDNet for the pointer and for bringing up the subject.