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Taking Freemium Viral

What it is Freemium?

It’s a term that was coined by venture capitalist @FredWilson…

“Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.”

How does it work?

In the online world most companies understand that the ‘free’ in freemium is necessary to increase the likelihood of people trialing their service or app. Everyone who uses a Freemium model gets two things right, they have a free version and a premium version.

Dropbox is an storage service which allows you to back-up all your files online and access them from any computer, very valuable! They give you 2G worth of storage free, then you can pay a monthly subscription for premium storage of 50G or 100G.

Like a dealer giving you your first hit for free to get you hooked and coming back for more, the more people that try Dropbox the more likely they are to find a niche of users who love and are willing to pay for the convenience that Dropbox gives them.

Supercharging Freemium

What is often overlooked in the fremium model is the importance of “word of mouth” and “referral networks”. Yes, merely offering a free service can lead to referrals, but how do you ramp up this referral and turn it viral?

Principles of viral marketing:

• Create something of value
• Reduce barriers to entry (make it free)
• Reward sharing
• Make it easy to pass the message on

Assuming that you’ve created something that people want to use  and you’re operating a freemium model how do you make the last two points work?

Reward Sharing

What Dropbox do, which is really quite innovative, is incentivise sharing by offering their free users extra storage for each of their friends who sign up.

Make Sharing Easy

I didn’t have to go looking for the opportunity to gain more storage, it came to me. Three months ago they sent me the email that you can see here.

I simply clicked the ‘invite people’ link and I was taken to the drop box referral page.

Once I was there I had three options, scan my email address book, enter a specific person’s email address or share a link via Facebook and/or Twitter.

Me being me, I opted to share the link on FB & Twitter, but then I also thought about specific people who would actually find this useful, and I emailed it to them as well.

The Result

The beauty of this is that everyone is happy. I was rewarded for my sharing efforts, my friends who signed up were happy that I had recommended a valuable service and of course Dropbox are happy because they’ve got a few more users that might one day upgrade to a premium account.

Rewarding referrals is not a new concept, Threadless and Amazon also have referral schemes, the difference being that they don’t offer anything for free(mium).

It’s the barrier destroying “Free” in the Freemium business model combined with the rewards for sharing that almost guarantees any viral energy will turn into new users.

Think about it, would you be more likely to share this post if you were getting rewarded?