09.29
I was just reading Seth Gordin’s post on If Craigslist cost $1 and instant writers block cure 
. This got me thinking of the freemium model. I have heard both Chris Klaus and Jimmy Wales talk about this in the last year and use many tools that follow this model of revenue generation.
For those wonder what freemium is, it is a business model that works by offering basic services for free, while charging a premium for advanced or special features. Common examples of businesses that use the freemium model include wikipedia/wikia and Pandora.
Having a free product means people will use it more. You will have a larger community around your product and can reach out to hundreds of millions of users. On the other hand, a paid product will attract less people but create a more tight nit community around the product as well as your bank balance will soar (IF you have a good product).
My question here is, is it too much to have both? When Pandora announced that they will be restricting users to 40 hours a month of free usage, it too me less than 3 seconds to click the link to subscribe for Pandora ONE. The value I get out of Pandora was well worth the $36 I pay a year. 95% of Pandora’s users will never actually reach the hour limit and are happy with the free version while the few power users such as myself are more than happy to pay for it.
Being the entrepreneur that I am [and also the cut-throat mercenary that I am ], I believe that if there is money be made, make it!
So, here is my proposition for Craigslist: Keep what you have and launch another craigslist Premium. Craigslist Premium will charge $1 per posting. People who use craigslist can continue using the free version that is filled with spam listings and scams. There will be a small percentage of power users though who will recognize the value of the premium service and will migrate over to the premium version and start crunching out $$$ for Craig Newmark. And the best part still? It’s going to cost them practically nothing. Craigslist already has all the things they need for this to be implemented. The premium version will have the same features as the free version and craigslist already charges people for posting in certain sections.
Will the freemium model work for you? It all depends on a factor of how good your product is and how much you are giving away for free. If you give away too much, people won’t pay for the premium version; give away too little and they will not be attracted to try it for free. But one thing is for certain, it has to be good.
Good, thoughtful post! Biggest question that comes to mind to me of Craigslist Premium vs. Craigslist Free would be the level of traffic. I would think they’d need to devise a solid plan to not cannibalize their own traffic too much, otherwise the current margins could potentially be hurt. Likewise, the ability for the current system to support that kind of change would come into play.
Overall though, I like the freemium model. What are your thoughts in terms of more companies really beginning to adopt them?
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