Freemium? Go for it! – Freemium Meetup Oct 2012
Our main sponsor, Kachingle talked about their launch that happened on Wednesday, October 10. Kachingle pivoted from a voluntary contribution system to a monetization platform for Freemium and premium apps and content by implementing a flexible, user-centric bundling platform on top of Kachingle’s existing capability. Built on the strong foundation of our proven usage-based micropayment engine, Kachingle now enables app vendors to bundle their offerings together in a compelling easy-to-signup-for package for consumers and businesses.
Freemium can play a big role in big, complex business software like Couchbase. – Bob Wiederhold, Couchbase
The evening started with a great presentation by Bob Wiederhold, President and CEO of Couchbase. About half of our audience had heard of Couchbase before. As an open-source software company, Couchbase offers NoSQL products, support and training, focusing on Internet and mobile. They have an impressive customer base —from huge online companies to ad companies, who are using Couchbase’s system for deciding which ads to present to their web visitors.
The Couchbase philosophy of Freemium is that the products they offer have to be free and easy; doing so removes friction. According to the CEO their product is:
- Free / No Cost
- Free / No Hassles
- Easy / Simple, Frustration-Free Setup
- Easy/ Simple to Use
Everybody is invited to play around for free for as long as they want to, and there is no registration necessary. There are no costs for a decent product, no hassles and it is simple to setup and use. The clients have to know that they are not going to get stuck having to pay later unless they need or want to.
Freemium plays a big role in much more sophisticated business. — Bob Wiederhold, Couchbase
Couchbase never forces users to register. It is crucial that the user has a great experience within the first 15 minutes of usage. Only then will he stick around to continue to have great experiences, but having them stay requires a lot of work. In total, the Couchbase approach makes it friendlier— but also harder— to convert them later. To increase the possibility of paying conversions, one thing they do is involve their user community a lot and try to find the right balance between business and community. Their users are playing a “big role” while the staff does the “heavy lifting.”
Their Freemium product is the Community version. In that version you can use everything, but it never provides paid support or source code. Users help each other; everything depends on the community. Also, upgrades are integrated later. With the Enterprise edition, clients get immediate updates, bug fixes, etc. Furthermore, there is full technical support, and support for older versions is available. Couchbase never provides anything other than a one year subscription. Since they don’t make people register, they don’t know how many users they have, and how many eventually convert. They use other methods for finding out about their users and build up a list of people who might become Enterprise users.
Freemium is a lot of hope that the users convert. – Pascal Finette, Mozilla
Pascal Finette, director of Marketing at Mozilla Labs, spoke about Freemium in open source. He proposed that perhaps the virtual beginning of Freemium was all the open source software projects, e.g. Red Hat, etc. His own experiences of the Freemium Business Model go back to the first boom of the Internet, at a time when time nobody was doing micropayments. He had a virtual greeting company that bombed, and then he saw eBay making small sales. People could buy small updates and tools for their computer games, for example. Basically you need valuable paying users and low cost, low maintenance system for the free ones. The cost of a user involves, for example, hardware and answering emails – even if it’s to say: “We don’t provide free support.”
Freemium outside of Silicon Valley
A big question is how to make people understand Freemium, or free to try, in the “real world” rather than just the tech-curious, early-adoption people in the Silicon Valley. Bob Wiederhold’s advice is to keep trying new things. He referred to the current software as “noSQL” which means something to techies, but less than zero to Joe Websurfer. But if you have a new concept in technology, you’re better off starting in a market where people are tech-experimental. Pascal pointed out that the Bay Area has a very different perspective on the Freemium Business Model compared to the rest of the world and especially Europe. The mental barrier in Europe seems to be: What is wrong with it, if they give it away for free?
SiliconValley has a different perspective on Freemium: Go for it! – Pascal Finette, Mozilla
Furthermore, you can hardly find any Venture Capitalist in Europe who would invest in a company which offers Freemium services. They are very skeptical since they think that the “Penny Gap” is incredibly huge. To them, Freemium is building a business based on ‘”hope” that eventually people will convert. The Venture Capitalists in the Silicon Valley take more risks with Freemium and are more likely to invest in companies with the Freemium Business Model. According to Bob, most companies at this state of business, as Couchbase currently is, are not cash-flow positive. So it is crucial to find the right market, and it also has to be a successful one. For example there is a shift taking place, driving people to new database models. Couchbase is disrupting old models and is getting attention this way. But the further you get, the more you have to show growth, retention etc. This is how your business will grow, according to the CEO of Couchbase.
Freemium is building a business on “hope.” — Pascal Finette, Mozilla
Another question is how Venture Capitalists determine whether a company has identified the right features, the right price point, etc. The VCs want to know the size of the market, and that you have good minds thinking through the growth strategy. They know that you are likely going to end up pivoting. So they care about your ability to analyze the market you’re entering, that you know how to make it take off. Pascal, as a VC himself wouldn’t be interested in the nitty gritty like features and pricepoint. Instead he wants to know that you’re A/B testing, that you have the right skill set, the right market, etc. For Couchbase it was very easy. The Database itself is complicated, but they knew in what areas they had the most opportunities for proprietary features. They are mainly focused on Enterprise solutions.
Mobile is the future. Every consumer app must have a great mobile version. – Bob Wiederhold, Couchbase
Bob sees a huge growth in the mobile industry, especially in the Third World, where they can more likely afford a smartphone than a computer. So for many people in parts of Asia, Africa and elsewhere, their first online experience is likely to be on mobile.
Want to learn more about the Freemium Business Model for your business?
If you are in the Bay Area, join our monthly Freemium SF Bay Area Meetup for a chance to hear world-class speakers and make networking connections! If you can’t make it, you can always catch the summary, video and presentations.
- Couchbase, an enterprise software company
- Kachingle, a Freemium Bundling Platform;
- Go Valley! an international entrepreneurship training program;
- and Rob Lau, of StartUp to IPO.