Digital publishers have long struggled with the issue of monetizing their offerings. Free content is ubiquitous on the Internet, which scares some companies away from hard paywalls and micropayment plans. However, failing to charge consumers anything makes it difficult to keep the lights on, since the financial viability of ad-based revenue models has declined in recent years.
As a result, many publishers have opted for a middle road between free and fee—the freemium model.
What is a Freemium Model?
Freemium describes a platform that offers a mix of free and premium content. Publishers who embrace this model typically offer basic or stripped down content for free, with richer articles and features available for a price.
Freemium is the number one pricing strategy in publishing-related apps, with 99 percent of apps in the iTunes store labeled “Newsstand” using freemium and 95 percent of the apps labeled “News” using it.
Does a Freemium Model Work?
Like every publishing eCommerce model, freemium works when implemented thoughtfully by publishers who meet specific criteria. They must have enough quality content to support giving a portion away for free—and retain a significant amount that’s available to only premium subscribers.
“The underlying rationale is that the bigger supply you have for one product, the bigger demand there can be for complimentary products,” explains Peter Froberg, a freemium consultant and blogger at Freemium.org. He adds that since content is distributed at no cost all over the Internet, a publisher’s free offering must be rich and interesting enough to compete, even for free users.
Companies who have executed profitable freemium models share some specific best practices:
They use free content to market their brand, educate potential subscribers, and win mindshare. It’s not enough to simply create an arbitrary line that walls off some portion of your existing content for consumption. The content you offer should tell your readers who you are, what you do, and demonstrate a base level of quality they can expect in all of your product, free and paid.
They constantly analyze usage data and use the results to inform meaningful A/B testing. Are you losing potential customers when they’re prompted to enter credit card information? When they’re presented different pricing options? Diving into really specific data at every step in the funnel can lead to educated hypotheses about why users are dropping out of the purchase process. Continuous testing—based on this data—will ultimately improve your conversion rates and user experience.
They collect user data in order to better understand their audience, so they can market to people who are statistically the most likely to convert to paid consumers. For example, gathering simple information such as birthdays, email addresses or geolocational data before consumers interact with free content can tell marketing teams information about usage patterns before people buy. What content converts well? Which content seems to resonate with users in specific regions or age ranges? The more you know, the more leverage you have to convert readers.
Implementing a Freemium Model: Common Mistakes
Just because your company meets the criteria for implementing a freemium model doesn’t mean that it will be successful. Here are four common mistakes to avoid when switching your eCommerce system to freemium.
Going after the wrong consumers. Are you catering to a demographic with disposable income, or young adults living paycheck-to-paycheck? Knowing your audience is key—your readers must be willing and able to pay for the content they consume. Even better, your content should cater to a gap in the publishing space, whether that’s an underserved niche market or an entirely overlooked demographic.
Providing too little or too much value in your free offerings. This content must be high-quality and useful enough to attract readers but must still have premium features and information reserved that will compel users to upgrade to paid members. Striking this balance is tricky, but possible with continuous funnel testing.
Not tracking metrics for data to constantly improve your freemium experience. How much does it cost you to provide free content to your users? What is the return on your investment? How often should new content be published? Having your finger on the pulse of consumer behavior is critical, and will help you avoid spending more money than you’re generating.
Not creating a user path to guide potential subscribers down. Simply throwing up a call to action after a user hits their content limit won’t cut it. Instead, start by hooking readers. Once they’ve engaged with your content numerous times, offer them the opportunity to learn more about a premium perk, making its value clear. If they decide to upgrade, have a path that keeps them interested, such as offering detailed product and site tutorials. If they don’t, continue serving them quality content without being overly aggressive.
What are the Benefits of a Freemium Model?
Advocates of using a freemium model in publishing cite numerous benefits for both consumers and publishers.
It gives potential readers a “taste” of what’s offered, without any financial commitment, building brand awareness and establishing trust between publishers and consumers. For many publishers, such as the New York Times, this free quota is reset every month, allowing users to sample different types of content before deciding if a subscription is right for them. This “try before you buy” process means that readers don’t feel duped into purchasing a subscription when they do convert.
The popularity of social media sharing offers publishers the opportunity to get more eyes on their content, adding value to it and increasing the number of potential conversions generated by that shareable article or infographic.
Successfully implementing a freemium model allows publishers to hit the sweet spot between free and paid, attracting reluctant subscribers with a “try before you buy” deal without sacrificing the value of their premium content. This publishing eCommerce solution can be tricky to balance, but done correctly, can help content companies grow their consumer base, generate revenue, and sustain success in the post-print publishing age.