freemium

adj.

Relating to a business model that offers basic services free, but charges a premium for advanced or special features.

Example Citations:

Rather than bragging about how insanely great its VoIP products are, Skype makes its users insanely productive by letting them talk with any other user worldwide for free. The company makes money by charging users for connecting to phone systems outside of its network. It's a freemium model: Attract users with free services, then charge them a premium for special features.

—Bruce Sterling, "Blogging for Dollars," Wired, June 1, 2006

Files are stored centrally, so you will not want to use this method to transfer sensitive data. And since somebody has to pay for storage and bandwidth, you get limited capabilities for free — premium plans get you more storage, bandwidth or access to your files (Web 2.0 jargon alert: this free-to-premium escalation plan is being called the 'freemium' model).

—Rafe Needleman, "The large-file problem," ZDNet UK, May 18, 2006

Earliest Citation:

Free + Premium = Freemium?

—Jarid Lukin, "My Favorite Business Model" (comment), A VC: http://avc.blogs.com/a_vc/2006/03/my_favorite_bus.html, March 23, 2006

Notes:

In the world of direct mail, the word freemium (in use since at least 1988) refers to a sample of the company's product that is sent along with a marketing piece (think: tiny boxes of cereal, "personalized" pens, detergent samples, etc.).

Related Words:

business-model patenting

freeconomics

Categories:

Buzzwords

Companies

E-commerce