Freemium

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Freemium is a business model that works by offering a basic product or service free of charge (such as software, web services or other) while charging a premium for advanced features, functionality, or related products and services.¬†The concept was articulated by venture capitalist Fred Wilson in 2006: ‘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.’

After describing the business model, Wilson asked for suggestions as to what to call it. Within a matter of hours, more than 30 name suggestions were given by his blog readers. One such suggestion came from Jarid Lukin of Alacra, one of Wilson’s portfolio companies. Lukin coined the term ‘freemium,’ and Wilson and his audience adopted it for the business model.

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