I've noticed that some SaaS solutions such as the wonderful Freshbooks mix the 30 day free trial offer on the premium versions along with a free forever version. Because they've segmented their offering so elegantly, I think there's a natural upsell once you start using the product and your requirements continue to expand. Nice work guys!

Andrew, thanks for an informative blog.

The distinction you are making that Salesforce has a free product targeted in one direction and then paid products targeted elsewhere to me is the definition of Freemium. The fact it's segmented for different audiences is exactly what drives people to upgrade after their usage expands.

I don't think doing Freemium is a matter of whether or not you can afford it. My view is, creating and supporting the Free product is like a marketing expense to drive usage of the Premium product. The question is whether or not you'd rather spend your marketing dollars there versus buying ads or building out a big sales team.

I have been part of a couple (successful) enterprise companies as well as a co-founder of a telecom software firm and a lead gen firm for B2B tech companies – Freemium is a tough sell in the enterpise. Having said that, I do believe that the late 90s large enterprise deals are long gone and the sales/lead gen model does need to change. Unfortunately, there isn't as much knowledge base in that area as there is for consumer products.

I will wait to talk more when/if you decide to write another post on this at a later time Sean's blog was a good find for me – thanks for sharing.

My apologies. The comment was actually in response to Fred Wilson's comment against “charging upfront”.
For some reason, the Disqus comments went awry on my laptop.

By referring to Salesforce, I was focusing on the services that were targeted to businesses. The free version is actually for individuals. It is much the same way where Microsoft used to waive or heavily discount their student charges but charged corporate users the full price. It was a long-term strategic decision that companies like MS and Salesforce can afford to make.

Back to the central point, my personal view is that startups that target businesses shouldn't be afraid to put a price on the value they are delivering. The market will determine if the price/value ratio is balanced. Offering “free” can often be an expensive cop-out.

To summarize, I guess we both agree that freemium isn't a silver bullet.

1) What do you disagree with? My post doesn't really have a specific thesis or point, it is more recounting a bunch of ideas from a dinner. Are you saying that you disagree with freemium, in general, across all scenarios as a potential strategy?

2) Salesforce actually has a free edition:
http://www.salesforce.com/products/editions-pri...

3) My overall point, discussed by the thread above, it's not that freemium is a silver bullet that works for all enterprise products in all cases. It works for some well-defined scenarios, but ones that are more approachable for web entrepreneurs because you don't need a direct sales team.

I think one of the big lessons that buyers of enterprise software learned after the 90s is to be wary of directly sold products that the people in your enterprise may not like. There's a higher chance of success to see enterprise tools that get traction at the group, departmental, and higher level, and then do a larger deployment across the enterprise.

Now, I still agree with you guys that freemium is not right for type of enterprise product. I think this is especially true for specialized, feature-rich products that are used by a small number of users within a company. But for products that are widely used by the rank and file, freemium has the nice property that it can help you virally spread within a company.

It's definitely interesting to contemplate the situations in which freemium is a strong value prop – it's clear that it can go both ways.

Take Salesforce.com as an example, afaik, that company has always charged its customers from the onset. The value they derived from the service ensured that they continued to renew their subscriptions and evangelize the service to other users.

Whilst “free” may make sense for consumer web firms like Twitter, it doesn't make sense for startups that provide utilities to businesses. In that world, “real value and ROI” trumps free.