The 10th Freemium Meetup was held in San Francisco. More than 70 members of our Freemium group showed up. Doug Caviness of cleverbridge and Daniel Freeman of Atlassian presented their insights about Freemium. The event was sponsored by cleverbride, Atlassian and Kachingle.

Doug Caviness, cleverbridge

What’s in the cloud and what’s driving cloud adoption?

The head of SaaS solutions at cleverbridge, Doug Caviness gave his presentation about Freemium in the Cloud. Since cleverbridge provides help to SaaS companies selling worldwide, they are very flexible in their billing models. The main question is what is in the cloud and what is driving cloud adoption. It is crucial to choose the right business model, use e-commerce effectively, and use different tactics to acquire and retain customers (Freemium, etc.).

Cause + Freemium = Causium

Daniel Freeman of Atlassian leads the team that is responsible for pricing, packaging and marketing, and content made to inspire new visitors to try Atlassian. When sales flattened out, Atlassian tried Freemium. They ran a super-successful marketing campaign: 5 users, 5 dollars, 5 days — with all the proceeds donated to charity. And with the Freemium offering so successful they made it permanent. Vendors must experiment with marketing and new ideas to discover and not be afraid to do “Break-mium”: Breakung up the Freemium /Premium Business Model like Atlassian did. Be distinctive and give a reason why something is a good idea. The 5/5/5 charity model had a Causium = Cause + Freemium. So far Atlassian has raised $2.25M for charity.

Daniel Freeman

SaaS is the future

Some great examples for cloud based SaaS services are Salesforce.com, LinkedIn, Dropbox, Amazon Web Services, etc. In 2011 the cloud market share was $40.7B and will grow to $241B in 2020.

In 2013, the SaaS share of global software vendor revenues will be $81B compared to $25B 2010. This is an increase of 224%. Furthermore, SaaS will be disruptive comprising about 25% of the worldwide software market (CRM, HR Mgt, IT Mgt, Security).

Trust BYOS (Bring Your Own Software)

• Public cloud – 63%
• Virtual private cloud – 18%
• Private cloud – 19%

(Source: “Sizing the Cloud”, Forrester Research, April 21, 2011)SaaS forecast for 2013:

• $33 billion or 81% of Public Cloud revenues
• 17% of the $476 billion Software market

(Source: Forrester Research, Jan 12, 2011 “Which Software Markets Will SaaS Disrupt” Report)

But SaaS will not replace all categories of software. For some, SaaS might just complete their traditional software. The reason is, people trust BYOS. Small organizations use 60% of their own software. Small teams within larger organizations use only 24%. There is a huge opportunity that they will convert complete eventually. (Source: Forrester Research, Jan 12, 2011,  “Which Software Markets Will SaaS Disrupt?”)

(Source: Forrester Research, April 21, 2011, “Sizing the Cloud)

Cloudability allows IT managers to track cloud use and subscriptions. The most common payment models are ads, subscriptions, virtual goods, etc. To make money in E-Commerce you have to find the right solution.  Freemium will not work unless you can scale to millions of users because only a small fraction will ever pay for a service.

Doug and Daniel

Freemium:  Not a Silver Bullet for Everyone

To entice users to convert from a free to a Premium subscription they must see the benefits. Or vice-versa, show them what they will lose if they downgrade. Make them commit to the service. But don’t water it down. According to Daniel it is good for a vendor to have a full featured product for free, with full free support. They tried this strategy and it worked.

Not every SaaS service benefits from the network effect. For companies like Facebook, Zynga, LinkedIn, etc. networking works like a charm. But, for companies like Pandora, YouSentIt!, and Carbonite networking doesn’t work as well. SaaS vendors should ask themselves if their services benefit from the network effect and are switching costs too high for customers to upgrade from free to Premium.

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.