Dennis Mitzner says, “The Freemium model – a combination of the words free and premium – takes place when a business offers basic services free of charge while providing advanced or additional features at a cost.

Free trials are a prime example of freemium, which are built on the assumption that leads will become customers when the initial trial period is over.

Dropbox, one of the most popular cloud storage applications, has grown to over 400 million users from 50 million users in 2010 using the freemium model. The company gives users 2GB of free space and offers paid plans to upgrade the storage capacity, which start at $9.99/month or $99/year.

In 2011, it was reported that only 4 percent of Dropbox users were paid subscribers, which sounds minuscule, but if that percentage has stayed constant to date, this means the company has earned over $1.18 billion dollars in annual revenue“.

Is Free Valuable? A Look at the Freemium Marketing Model

Business.com

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