...The Freemium Business Model Does it Work The Freemium Business Model Does it Work In a world where advancements are made every day, conscience efforts are given to affect change in the most peculiar ways. If a look backwards were to be taken one could see that from medicine to television changes that could have never been thought of, exactly were that, thought of. Creations are made and ideas are born. One direction that is always a consideration is how to attract more consumers into a specific market without scaring them away and turning a great revenue at the same time. While businesses advance as technology does at times, both are intertwined. With the advancement of technology including 3-d screens, descriptive color patterns and certain psychological focus points that attract a person’s unconscious mind to a specific product, the advancement of business practices must be the same in attracting certain detail of a product to that of making a person wanting more or feel as though they are receiving a special offer. Even if for a limited time. Many people who partake of services want the most up to date and the most opportune times available within today’s abilities. Granted, at a much faster pace, always on the move and too many appointments to complete in one day, the most is the best in the most convenient ways. More and more often than not, what is seen are special ads such as with premium channels on television; HBO, Cinemax or Starz all offer certain time frames for...
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...Business 121 Slide Ⅰ 1. What is a business model? * * A business model describes the rationale of how an organization creates, delivers, and captures value.(How a company intends to make money / the logic by which it sustains itself financially. Or how your idea actually becomes a business.) * * 2.Business model canvas? * * * * * * * * * * * * * * * * * * * * * * * * * * 3.What is a multi-sided platform business model? Give an example, list the customer groups and explain how they interact with each other. * * Multi-sided Platform is one of the business model patterns. Multi-sided Platform brings together two or more distinct but interdependent groups of customers. Such platforms are of value to one group of customers only if the other groups if customers are also present. The platform creates value by facilitating interactions between the different groups. A multi-sided platform grows in value to the extent that it attracts more users, a phenomenon known as the Network Effect. * Network effects and Positive feedback loops are economic terms that describe the snowballing benefits to front-runners in some markets. * * Example and analysis: * LinkedIn is the world’s largest professional network. As of 31st March 2012, LinkedIn had 161 million members in over 200 countries. LinkedIn helps the professionals...
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...1. Compare Pandora's original business model with its current business model. What's the difference between "free" and "freemium" revenue models? Pandora originally started with a subcription type of business model wherein users must pay $36 per month after they have used up their 10 hours of free access. The original model used was the free trial type. What happened was after the free trial of 10 hours was used up, the customers were unwilling to pay for the subscription fee. Now, the new and current model being used by Pandora is the freemium business model. The new model offered users longer time limit in using their features, which could be used again in the next month and so on. They gave the users 3 options after the free time was used up. It was either (a) to pay $0.99 for the month, (b) sign up for a premium service offering unlimited access, and (c) do nothing and wait for the next month to come, which was said previously. The new model turned out to be successful and was able to double the profits for Pandora. The free revenue model offers a free trial of a product/service for a limited time. After the users have used up the free trial period, the company now will charge the user in order for him/her to continue the use of the company’s products/services. The freemium revenue model, in the other hand, offers the user unlimited free access but only to limited features of the company’s products/services....
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...Dropbox’s current business model Freemium Dropbox utilizes a freemium model that offered both free and premium accounts. To be clear, the users can get the basic services for fee, and they can get more features, functions or storage for a fee. Initially, any one can register a Dropbox account for free to become a user. Each Dropbox user can use 2GB storage space to store any files such as photos, videos, music and Microsoft document files etc. Through any devices such as laptops, Mac, iPad, iPhone and Android phone, files can instant synchronization and accessed without internet. With a sharing folder, user can easily share data with other people, even if people do not have Dropbox account can also access the shared file by clicking the share link. User no longer have to worry about files will disappear, in addition to historical versions stored function, when a user accidentally deleted files, he or she can recover accidentally deleted files within 30 days. When upgrade to Dropbox Pro, user need to pay $9.99 per month and get 1TB (about 1000GB) storage space. In addition to all the features of the free version, Dropbox Pro’s user can set a password to protect files and decide who can access the file. In summery, Dropbox has a number of core values such as easy of use, sync files across different devices, security, file recovery and simple sharing, thus, more and more people begin to understand the convenience of Dropbox, which increased the number of users. [1] ...
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...case. It’s all about music from a radio that doesn’t work like the one we always listen to that I will refer to as traditional radios for the purpose of this case study. With Pandora, the users select a genre of music they want to listen to and a computer program determines all of types of music related to along with other artists they might be interested to listen to their music. I will first compare describe Pandora’s original business model as well as its current business model, and then compare the two business models. I will also discuss if Pandora would have been successful if it had started out originally using another business model. I will therefore explain some of the concepts related to the case study such as free revenue and freemium revenue models. I will question the assumption that free revenue models have a predominant place in e-commerce. Pandora’s business models When Pandora was founded, the firm first business model was to offer its users 10 hours of free access as bait and then asking them to pay $36 a month for a year after they used up their free 10 hours. But that business models turned out to be ineffective because people were listening to their first hours for free and then wouldn’t pay for the annual service. The business model was therefore inefficient too and resulted in a near financial collapse. In 2005, Pandora a new business model that offer the possibility to listen to...
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...Case Study 2.6—Pandora Pandora radio originally operated as a freemium business model but soon switched to an ad-supported free business model. The difference between the two is what quadrupled their revenue. Pandora offers a unique customer value proposition. MailChimp succeeded with a freemium model but Ning did not because MailChimp was able to deal with issues because free products are ripe for abuse. When Pandora opened in 2005, they offered users 10 hours of free radio, then a year’s subscription for $36 per year. “In the first couple weeks we had 100,000 people come through and the vast majority listened to every last minute of their free ten hours,” said CTO Tom Conrad. “Then we asked them for their credit card and they would wander off into the wilderness.” (Gannes, 2010). They quickly switched to an ad-supported model. It was ad-supported in name only, however, because they had no ad server, no ad staff — not even a place on their page to put ads: But growth quadrupled overnight, and within three days, Apple called and asked to buy out ad inventory through December (Gannes, 2010). Pandora’s customer value proposition is an uncanny algorithmic ability to predict the music their customers want to listen to, and unlimited free musical content for those that don’t mind listening to advertisements ("Pandora and a," 2012). For freemium models, it was difficult to succeed for one main reason. A 354 percent increase in abuse-related issues like spamming, followed...
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...To examine the effectiveness of the ‘Freemium’ business model. Student Name | Kyle Brown | Student Number | N00128284 | Student email address | kyle.brown@student.iadt.ie | Date | 31/10/2014 | Submitted to | Eva Perez | 1 Introduction 3 1.1 Research Questions & Objectives 4 2 Literature Review 5 2.1 The 5% Rule 5 2.2 Music Streaming Services & Spotify 6 2.3 Freemium & Piracy 7 2.4 Consumer Perceptions 8 3 Research Methodology 9 3.1 Research Design 9 3.2 Data Collection 10 3.3 Sampling 11 4 Ethics 11 Harm to Participants 12 Invasion of Privacy 12 References 13 1. Introduction The term Freemium was originated by Jarid Lukin of the Flatiron portfolio company Alacra. Moreover, based on this term, Wilson, a venture capitalist, built up a business model in 2006 (Wilson, 2006). ‘Freemium’ is a business model which has emerged in recent years and has become increasingly popular within the digital service industry, particularly for ever growing music streaming services such as Spotify, as this model has almost saved the music industry from being washed out through ever growing piracy issues. The company has posted growth at a staggering rate of nearly 8,000 subscriptions per day and is currently valued at $3 billion dollars (Hampp, 2013). This substantial growth provides an interesting platform for the researcher and to find out how effective the model is for businesses like...
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...ECOMMER K31 Pandora Case Study 1. Compare Pandora's original business model with its current business model. What's the difference between "free" and "freemium" revenue models? Pandora originally started with a subcription type of business model wherein users must pay $36 per month after they have used up their 10 hours of free access. The original model used was the free trial type. What happened was after the free trial of 10 hours was used up, the customers were unwilling to pay for the subscription fee. Now, the new and current model being used by Pandora is the freemium business model. The new model offered users longer time limit in using their features, which could be used again in the next month and so on. They gave the users 3 options after the free time was used up. It was either (a) to pay $0.99 for the month, (b) sign up for a premium service offering unlimited access, and (c) do nothing and wait for the next month to come, which was said previously. The new model turned out to be successful and was able to double the profits for Pandora. The free revenue model offers a free trial of a product/service for a limited time. After the users have used up the free trial period, the company now will charge the user in order for him/her to continue the use of the company’s products/services. The freemium revenue model, in the other hand, offers the user unlimited free access but only to limited features of the company’s products/services. 2. What is the customer...
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...Freemium: attributes of an emerging business model Nicolas Pujol, author Pujol Enterprises LLC, Kirkland WA http://nicolaspujol.com; info@nicolaspujol.com DRAFT v1.1, revised 11 December 2010 Origins and types of freemium An umbrella term for new and old commercial practices Freemium is a term increasingly used in commerce to designate a business model using two products or services, or a combination of products and services. In such combination, one item is provided at no charge while a complementary item is sold at a positive price. Unlike what economists call tying, the free and commercial items are softly connected: the complement is not indispensable. The practice has existed for decades, although it carried different names and forms. The term Freemium was coined by venture capitalist Fred Wilson in 2006 and is gradually becoming a model that businesses identify with. Freemium relies on a free version of a product or service, and by design there are complements that can take various forms . Commercial transactions happen outside of what is given away. The delta between what is free and what is paid is called product differentiation. Freemium is sometimes mistaken with two-sided platforms. In the latter case, a company deals with different groups of customers. Each constitutes a market side that is statically established. There is no transition or conversion from one side to the other. In freemium however, free and paid users may constitute one general group. Each free...
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...Case 2: Freemium Pricing at Dropbox In this case, we are asked to provide Dropbox some recommendations in order to address three major issues: the customer growth in B2C and B2B markets, the free-topay user conversion and the competitive threats. First, it is important to describe how each of these issues came about and why they are critical for Dropbox going forward. When A. Ferdowsi and D. Houston launched Dropbox in 2007, they knew that getting business customers would be tough due to bureaucratic delays in getting them to integrate the services into their operations. Another problem was that getting individuals to pay for Dropbox was hard because mainstream consumers were still not used to using cloud-storage services. To overcome that, they first focused on the individual consumer market (rather than corporate clients) and adopted a new pricing concept called “Freemium” which consists in giving away basic services for free (and thus only charging for premium versions). By coupling this “free way” to try the service with an efficient incentive program allowing people to get free storage upgrades, Dropbox was able to hold a large share of the consumer cloud storage market but also to indirectly penetrate the corporate world. Indeed, Houston’s goal was to get individuals to use and like Dropbox so much that they, in turn, got their employers to sign up as well. All this worked so well that they grew from 4 million users in 2010 to 200 million in 2013. The next...
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...Michelle Resendes Managing E-Business BA351 07/13/2014 Pandora‘s business model consists of actions that lends the company to operate as a B2C, content provider, e-commerce site. Both the original business plan and the secondary plan in late 2005 supported the consumer market of “enjoying accessible music”. In assessing Pandora’s two business models you see that most of the originating or base elements stayed the same in each model but some key elements changed. These element changes were major catalysts in leading Pandora through its venture from a company who in late 2005 was faced with major financial issues, to in 2013 the most successful business for subscription to radio service. Pandora coming into the race had a first -mover advantage because they were the first on the music supply scene with an algorithm that puts together a personal radio station based on the consumer’s tastes. This algorithm customized the consumers experience by basing its selections not only on the selected artist but also favorite musician and closely related music by different artists. As part of dealing with the competitive market Pandora’s main business strategy was to differentiate itself from competitors like I-tunes and P2P sites by focusing on the value its customization tools provided to the users. Being able to offer more personalization and accessibility expanded Pandora’s market space. The management team at Pandora took a risk and changed some key elements in their business...
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...Case study 1 | Pandora | The Freemium Business Model | | Christian Ortiz | E-COMMERCE MODELS AND ITS APPLICATIONS MKT 640GEORGE ACKERMANOCTOBER 2013 | Pandora Pandora Radio started as Savage Beast Technologies and was founded by Will Glaser, Jon Kraft, and Tim Westergren. Later on after nearly failing, the company was renamed Pandora Media and launched Pandora Radio on July 21, 2005 (Arrington, 2005). Pandora is an internet radio service, recommendation service, and the custodian of the Music Genome Project. Pandora works by users entering a song or artist that they like, and the service responds by playing selections that are musically similar. Users provide feedback on approval or disapproval of individual songs, which Pandora takes into account for future selections (Crunch Base, 2013). The Music Genome Project is the backbone of Pandora Internet Radio. The goal of the Music Genome Project is to take music and boil it down to quantifiable data. Every song in the Genome’s library is analyzed by a musicologist, which is usually a musician with a strong backgrounds in music theory. The musicologist then breaks down and rates over 400 attributes of every song, from the “soulfulness” of the vocals to the rhythmic and key changes in a given song. These 400 attributes are combined into larger groups called focus traits, and there are 2,000 focus traits. Some examples of these focus traits are rhythm syncopation, key tonality, vocal harmonies, and displayed instrumental...
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...Pandora and the Freemium Business Model 1. Compare Pandora’s original business model with its current business model. What’s the difference between “free” and “freemium” revenue models? Pandora’s original business plan was to give away 10 hours of free music then after the free time is up then they had to subscribe to the service. The next attempt was to allow 40 hours free time then they had a choice to subscribe to the service or wait till the next month to sign up again. The third time they had affiliates and advertisement to help with the cost that was not able to get from the lack of subscribers. When one subscribed to the premium service they received better service from Pandora. In the “free revenue models” you give a locked version or allow a certain amount of time for the use of a product so that in hopes of getting the person to subscribe to the service, whereas in “freemium revenue models” you allow them to have the basic service for free then offer the premium service for a monthly fee. 2. What is the customer value proposition that Pandora offers? When the customer decides if one should pay for the service that Pandora offers, they see that when they upgrade to premium service they receive fewer usage limits, no advertisements, higher quality streaming music, and a desktop app. 3. Why did MailChimp ultimately succeed with a freemium model but Ning did not? MailChimp succeed because they gave away just the basics to entice the members to subscribe. They...
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...your end customer and how are you going to get to them? 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS DIRECT SALES ‣ Search (SEM, SEO) ‣ Social Media (Facebook, Twitter) ‣ Digital and mobile media ‣ PR / Events ‣ Paid Media (traditional media) ‣ Outbound Sales PARTNERSHIPS ‣ Referral ‣ VAR ‣ OEM ‣ APIs 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS KEY #2: METRICS THAT MATTER 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS KEY #2: METRICS THAT MATTER What are the drivers (KPIs) for your business? 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS ‣ Customer Acquisition Cost (CAC) 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS ‣ Customer Acquisition Cost (CAC) ‣ Free-to-Paid Conversions (Freemium model) 3 STEPS TO ACQUIRE AND KEEP CUSTOMERS ‣ Customer Acquisition Cost (CAC) ‣ Free-to-Paid Conversions (Freemium model) ‣ Lifetime Value (LTV) 3 STEPS TO ACQUIRE...
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...“free” and “freemium” revenue models? Pandora’s original business model was to provide users with 10 free hours of access to their website contents. Once the 10 hours has been used up, they will then be asked to subscribe to Pandora at a rate of $36 per month for continual access. Whereas, their current business model is designed where users can access their online radio for free as long as they sign up for an account, but are exposed to ads while streaming. The Freemium model is designed to give away some services to 99% of the customer base and rely on the other 1% of customers to pay for premium versions of the same service. In a business model, “freemium” basically means the basic version of a product or service is offered free to use, but is only limited to the basics provided, whereas “free” is the product/service is completely free access to the range of contents it provides. The revenue is then generated from targeted advertisings and displayed to users while they are on Pandora. 2. What is the customer value proposition that Pandora offers? Actual subscribers of Pandora will not be displayed advertisements and higher quality of music while streaming. The people who pays for Pandora has pretty much unlimited usage for $36 per year, while the people who are listening to music with Pandora for free are limited to only 40 hours of music per month, while subjected to advertisements between songs. 3. Why did MailChimp ultimately succeed with a freemium model, but...
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