RE: Freemium (was: Persee in danger)

[William Park <wpark@deepdyve.com>]

The 'freemium' model is one whereby a business can attract a much 
larger audience of users by offering a free version, and thereby 
make enough profits if just a small minority of those users 
'upgrade' to a premium services.  The freemium rule of thumb is 
the "5% rule" where the business model is sustainable (i.e. 
break-even) if just 5% of the audience pays. The other implicit 
rule is that the service being offered for free must have 
virtually zero marginal cost, i.e. the cost of serving the n'th 
user is near zero.  This works of course in digital 
products/services such as content, games, and so forth and we see 
examples of it everywhere: Skype; Angry Birds; Wall St Journal; 
Pandora; and soon the New York Times 
(http://www.nytimes.com/2011/03/18/opinion/l18times.html?_r=1).

Where the analogy falls short for Persee is that the premium 
users (librarians) are not the actual the free users (end users). 
It is more analogous to Google's search engine where advertisers 
subsidize consumers, however the advertisers gain a clear and 
measurable financial return - traffic to their site that can be 
directly monetized, a more challenging calculation for library 
services.

Put another way, there are no premium services available for end 
users to make themselves self-funding.  Many publisher sites 
offer a freemium model perhaps unbeknownst to them but their 
service is often too blunt.  Users have free access to most if 
not all the features of the site (search; alerts; etc), there is 
no premium fee for advanced functionality or heavy usage that the 
most demanding users may be willing to pay for.  Similarly, 
content is very binary:  free abstract or a very expensive pay 
wall, which for most users is too expensive such that far less 
than 5% pay.

The potential opportunity is to segment features more granularly 
to attract and convert more users.  Charge discretely for 
critical features.  Offer varying degrees of access to content 
for varying prices across the spectrum of customers such that one 
category of users does not cannibalize another but rather is a 
feeder or ladder for those users to migrate upwards.

This opportunity I believe will only grow over time as the world 
(i.e. potential customers) becomes more educated and more 
connected.  I encourage reading Mary Meeker's report on mobile 
trends (Mary is a research analyst formerly at Morgan Stanley, 
now at the venture capital firm Kleiner Perkins): 
http://www.scribd.com/doc/48586092/KPCB-Top-10-Mobile-Trends

William Park
DeepDyve

-----Original Message-----
From: owner-liblicense-l@lists.yale.edu
[mailto:owner-liblicense-l@lists.yale.edu]
On Behalf Of jean.claude.guedon@umontreal.ca
Sent: Tuesday, March 15, 2011 5:05 PM
To: liblicense-l@lists.yale.edu
Subject: Re: Freemium (was: Persee in danger)

Indeed, "freemium" is a model often used in free software. The 
tricky detail, though, lies in the ways in which the free is 
"libre" or not (free beer vs. free speech to use Stahlman's 
famous distinction, hence my use of the romance languages' 
"libre" which refers to free speech).

For example, Google gives us free pdf texts in page images, but 
they are not very "libre" in that their page image status does 
not allow for much re-use, etc. One can also see publishers 
gradually giving access to frozen texts (just like Google) while 
selling what is fast becoming the dominant mode of reading, i.e. 
reading with machines. The recent bounty call by Elsevier for 
"executable paper" (http://www.executablepapers.com/) is a good 
example of what is coming.

Clifford Lynch said it very well several years ago: there is no 
open access without open computation.

In conclusion, "Freemium" is an amusing term, a mot-valise, as 
the French would say (i.e. conflating two words into one: free 
and premium). Well handled, it provides an interesting framework 
for free/libre entities, but it does not go any further than 
that.

Jean-Claude Guedon

Le dimanche 13 mars 2011 a 16:33 -0400, Okerson, Ann a ecrit :

> Not yet familiar with the term "Freemium," I looked it up 
> online. We've heard about many such ventures, including in open 
> acess-world, and a number of them have been mentioned off an 
> on, on this list.
>
> The short Wikipedia article is here:
>
> http://en.wikipedia.org/wiki/Freemium
>
> Cordially, Ann Okerson/Yale Library