I’ve long been pretty skeptical about Freemium as a go-to-market strategy. I’m always prepared to be shown examples where it’s working well however and one of those came over my desk the other day from Scott McMullan, enterprise Google apps guy.
The deck was a copy of one McMullan presented at the Freemium Summit East. In the presentation McMullan does admit that freemium products, and SaaS apps generally do put pressure on the ecosystem – in their case, a margin sliced off the $50/year Google apps revenue is a pretty small number. McMullan also makes mention of the tension that exists with the free product competing with the efforts of the direct sales team.
In Google’s case, the justification for free, or at least why they like it, is summarized by McMullan as;
- the fact hat Google apps is competing in a mature market
- the fact hat there is a huge addressable market
- the fact that existing free customers give leverage
- the network effects (think virality)
- the generational shift as free .edu users bring their expectations to work
- the fact that there is an additional revenue stream for Google via ads
- the broad product allows differentiation and add ons
I’m still cautious about freemium, but in Google’s case it seems to be a good strategy – check out McMullan’s deck below