http://www.addicting-games.cc

At some unpredictable point along this progression, sales of a proprietary ad unit — and hopefully also a proprietary advertorial unit — work well.

I read your full post and your comment. I agree – it's hard to paint all freemium businesses with the same brush. I think there are two different cases:

1. A product with mass-market appeal where you have enough reach / audience potential that a small, concentrated audience of buyers is enough to support the entire audience of non-payers without offering two different products. I would put the social gaming and free-to-play gaming spaces in this category. A small percentage of payers can carry the audience. There's one key thing to make this happen, though – there is no cap on what a “power payer” can spend. If you had a F2P game model where you capped what top spenders could spend, I'm not sure it would work.

2. The second model is one where all / most paying customers pay the same price (a subscription or an a-la-carte consumption path where most people pay the same regardless of utility or consumption. These businesses are different. In that case, figuring out how to convert free users to paid customers when they're consuming key functions is a much different calculus.

If you look at a lot of the big companies in freemium today, they fall into category #1. Allowing your whales to spend as much as they want to or can afford allows them to cover many more non-paying users. Under model #2, the balance between paying and non-paying customers is much more important as your paying users will deliver a fixed amount of revenue.

I find it fascinating how differently we approach freemiums. I don't find it to be at all a problem to “properly segment users and features such that you provide enough value to both paid and free audiences.” I think content people and commerce people see freemium opportunities in entirely different ways.

You see the free version as the bastardized, “degraded” version” of the real, “paid product.”

Instead, I want to support users for Love or Money. I see the premium version as a tax on the 2% to 5% of the user base that abuses the free service. Any freemium I work on is free first and premium after because I want volume. The broadest adoption net is one that offers value for participation and attention and values the free users beyond their likelihood of conversion.

It’s not just an attitudinal shift. I think we also design our services and organizations differently. Most importantly, the 80/20 focus on earned media versus advertising is reversed. Earned media isn’t free, and it requires just as much forethought — and a completely different set of testing — as a great CPA plan.

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