The State of B2B Freemium 2013

Lincoln Murphy presents...
The State of
B2B Freemium 2013
A Reality Check

B2C vs. B2B Freemium

B2C... more TIME than MONEY

B2B... more MONEY than TIME

The State of B2B Freemium 2013 Copyright© 2012 Sixteen Ventures. All Rights Reserved.

Does Freemium Work?
• It depends...
• To build a revenue-generating business? Some are ﬁnding
success

• To build a Proﬁtable business? Jury is still out
• To build a massive user base and sell to someone else
who will monetize? Some successes... like the lottery

• Pick one and focus on it exclusively...

Your Product Won’t Sell Itself
• ...unless it's designed to!!!!
• Products that grow and “go viral” organically... don’t.
• Behind the curtain is an army of smart people making it happen
• Shouldn't seem forced; the conversion process should be natural
• Spend as much time developing the Customer Acquisition,
Engagement, Retention, and Viral Expansion processes as the core
functionality of the product

You need a massive audience
• Free-to-paid conversion rates are super-low even for
"successful" Freemium companies
• In the 3-5% range for the Classic Freemium model
• What’s the quid pro quo; if no value from the free
users, why have free users?


You need a lot of money
• Freemium isn't cheap for the vendor & it’s getting more expensive
• Freemium companies are raising money to steal users from
other Freemium companies, not just disrupt the legacy
software vendors, or premium SaaS companies

• Evernote $166M funding to date
• Dropbox $257M in funding to date
• Box $284M in funding to date
• Yammer $142M before Microsoft acquired them for $1.2B

Free is more accepted now
• "Free" has been around a while now and isn't as off-putting;
still non-starter in some markets
• The "free = zero value" time has passed
• Customers might not "get" the business model, but they
trust them more today
• People don't want to invest their time, energy, and resources
in a company that won't be there; got big funding? Flaunt it!
• Generational changes are opportunities
• "Let's cannibalize ourselves before others take our market
share!" - Legacy Software Vendors

But free isn’t enough
• Free isn't cool anymore; not a user magnet as before
• Getting free users is becoming more difﬁcult
• Know what you're displacing with your offering
• Once you get a user, get them engaged and use
them to spread the word
• Engagement isn't what it used to be; now it's even
more important!


Freemium can Streamline
the Complex Sale
• The complex sale is where different personas within a
company are involved in the buying process
• For example you might have an End User, an
Inﬂuencer, a Technical Buyer, and an Economic Buyer
involved
• Works well even where a sales person is still required
- by the market - to close the deal
• The Yammer model

Should you use Freemium?
• Don’t “Go Freemium” to avoid selling
• Know your audience
• Free Trials can be VERY effective; should you pivot to proﬁt?
• If your product doesn’t add value why are you in business? If it
does, maybe they’ll pay, right?
• If your customers have more money than time...
• Know what your goal as a company is, draw the line in the
sand and don’t deviate from that goal...


Contact Info

Lincoln Murphy
http://sixteenventures.com
lincoln@sixteenventures.com
@lincolnmurphy
(972) 200-9317

The State of B2B Freemium 2013

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