Why Freemium Could Be a Costly Trap

While in B2C startups the freemium model is widespread, in the B2B world it could lead to a costly trap. Case in point is Box, whose imminent IPO also shed some light to its finances and according to a recent Re/Code article says that of its 25 million users “only seven percent — fewer than 2 million at 34,000 companies — are paying for it”. The result is that Box doesn’t expect to see any profitability soon…. if ever. 

You may also recall Chargify, a subscription billing company that almost went bankrupt and had to kill their free plan and start charging customers.

In the enterprise or B2B world the “free trial” is the way most companies use the “free” option, to attract customers that will eventually have to start paying, whether 15, 30 or 60 days latter. This is not freemium, though.

One company that comes to mind that did well with a free offering is HubSpot. They offer their suite of “grader” tools (https://marketing.grader.com/) for free. This allows companies to assess their website and blog ‘score’ with suggestions for improvement. But wait, before you point your finger at the scream and yell “AHA!” look more closely… this free offering is NOT a free version of their product. It is instead a side tool used to promote the company so that other businesses try it out and might eventually decide to see what HubSpot is all about. Clever? Absolutely. Freemium? Not really.

As much as “free” can help attract interest from potential buyers, in the B2B side I haven’t seen a huge success, yet.

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One response to “Why Freemium Could Be a Costly Trap

  1. Hey Daniel,
    Do agree with you, Freemium is risky for B2Bs. How about having something like 10 days trial, or free with limited functionality ?

    Mark

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