Freemium is an attractive business model in theory. Offer a free service to attract folks and then convert some of them into a paid version with premium features. In practice it turns out to be hard to pull this off. The free version needs to be fairly functional in order to attract people. Unless the free offering is unique, which is rarely if ever the case, it also needs to be at least as good as offerings that are entirely free (competitors may be entirely free because they are ad supported, or because the service is a rounding error on someone else budget, or creates a data asset for them). Having this lower threshold then often makes it difficult to come up with enough premium features to justify a paid version. This is especially true for companies that operate in the conumser market. In the business market freemium is a bit easier for two reasons. First, there are usually capacity constraints that can be imposed that make individual non-commercial use possible but push any real business customer into the paid service. Second, it’s often possible to have the free version work well for individuals and have the paid version with features that support a team or other integration with the business. Finally, and most importantly it’s a lot easier to add $19.99 to a corporate card than it is to one’s individual card. So before embarking on a freemium model it’s well worth thinking through these issues in some detail, especially because it is difficult (impossible?) to switch to a different model once one has rolled out a freemium model.
