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The FREE VERSION: Cloudbeat Panel of Business Freemium Pioneers

Yesterday, the Cloudbeat audience got a real treat: a world-class panel of pioneers in Business Freemium talking candidly about how they conceived their businesses, how they evolved over time and how they scaled explosively.  Of course, everyone at the conference opted for the premium version of the panel, paying a pretty penny for the privilege of seeing the panelists live and asking whatever questions came to mind.  Here I hope to offer a very limited free version of the panel for those who can't travel to Silicon Valley or can't justify the expense of attending live.

YouSendIt, Yammer and Echosign are among the largest and fastest growing freemium services available to business users today.  Having started well before the business model became popular, these companies were navigating in unknown territory. Today, they serve more endusers than any other company in their markets, and many of their business practices have been emulated by other Business Freemium providers.

I think the live audience would agree that the panelists were remarkably insightful and transparent on how they think about building Freemium companies that target business users.  I'm afraid that I'll only be able to scratch the surface for the free users, but then, you get what you pay for.

  • Ivan Koon, CEO of YouSendIt, talked about how freemium companies must prioritize value delivery over value extraction.  The product or service must be so compelling that users want to share with their colleagues.  While free users don't pay, they provide value by exposing a large number of other users.
  • David Sacks, founder and CEO of Yammer, commented that freemium services tend to work when there are two types of users, free and paid, and when the population of free users enhances the value to those who pay.  Of course, this works best when there is strong viral coefficient, which may be the most important lever for cost-efficient growth.
  • Jason Lemkin, founder and CEO of Echosign, believes that true freemium must have a conversion rate (free to paid) of less than 2%, because a greater rate implies that users are really just using the free service as a free trial.  Having recently been acquired and integrated into Adobe, Echosign is now seeing an explosion of traffic and the resulting paid conversion.

I'll share one insight that was not discussed in the premium/live panel: these pioneering business leaders all share some common characteristics that probably align with the critical factors that lead to Business Freemium success.

  • They are really smart. It was very clear that each of our panelists could think on their feet, mentally model business drivers and abstract specific learnings to apply them more broadly.  Because Freemium companies have multi-stage conversion processes, it takes a sharp mind to understand how to manage and grow in a complex business model in a dynamic environment.
  • They are metrics-oriented. Every panelist had key business metrics in their head.  They commented on how they tweaked and testing to make small improvements that compounded over time.  This orientation is critical to Business Freemium success.  Freemium communities are dynamic systems, and these companies get extra leverage by measuring, testing, iterating and learning.
  • They are product focused. These executives spend a lot time with their product teams. They understand that for Freemium companies, the product is the value proposition, it's the sales person, it's the lead gen process, it’s the customer support rep and much, much more.

This is just a tiny taste of our discussion on Business Freemium.  If you liked the free version, then you should consider upgrading to the premium version next time.