Is Freemium the new Shareware?

(My) History of Shareware

Back in the mid-late 80s, my friends and I would buy a Computer Shopper magazine at the start of the summer and start calling in to local BBS.  Usually we’d find one or two each summer and spend the time downloading great games like Willy the Worm, or we’d spend time playing dopewars “online.”  All the games we got were either freeware or Shareware. (It wasn’t until much later that I realized BBSs had pirated software, and even then it wasn’t until I saw one BBS listed Michael Jordan Flight Time, and saw the same game at Best Buy later that week that I put 2 & 2 together.)

The great thing about shareware for us was we were just young kids who wanted to kill some time inside an air conditioned house.  We didn’t always have $40 or $50 to plop down on the newest Sierra game. We could download some of these games, play them for a couple weeks, and by the time we got tired of them, we could move on to the next game. It didn’t bother us that there was only one or two levels, or that we could only play the game 20 times (but let’s be honest, so many of those counters were broken it wasn’t even funny.

In fact, even when I went to college, I would still routinely download shareware games.  In fact, there were sites that only offered shareware.  Two of my favorites were some kind of first person samurai game, and Redneck Rampage.  Again, I wasn’t bothered by the inability to play more than 1 or 2 levels for a couple reasons.  First, I’m not a very good gamer, so it wasn’t guarenteed I’d get past the first or second level. Second, I tended to have a lot of classwork to do, and didn’t have a lot of time to play games.  (What free time I did have I usually spent reading hacker pages or hanging out in IRC chatrooms.)

The Problem with Free

At some point, we stopped hearing so much about shareware.  I don’t know the exact time or place, but I rarely heard about “shareware” through most of the early 2000s.  Perhaps it was the explosion of the internet, torrenting and software pirating that most people stopped caring about shareware, when they could have a full version for free.  Perhaps it was the introduction of game systems like PS2 or XBOX360 which had such good graphics that the shareware games looked like they were done by 3rd graders.  Or perhaps it was game producers realized packing the entire game but limiting the features was error prone.

Crack codes flowed abundantly.  Additionally some programs with timers (you have 15 days from right now) were implemented so poorly that you could simply uninstall and reinstall once a month and be set for life.

At the same time as the decrease in shareware, the web starts taking off.  I could go play shockwave games for free. It wasn’t just games either, companies like Yahoo and Excite were offering news aggregation, email and other services for free.

After the Dot Com bust of 2000, people started trying to figure out how to actually monetize web content.  Some sites that were free tried to start charging for their services.  Others went the route of trying to offer tiered services.  Truth be told, this is still an area that few companies have actually figured out.

One possible solution that has emerged recently is called “Freemium.”  Apparently, this term originates from a VC blog post from back in 2006. Since that time, some pieces of software have been successful using this model.  For example, Zynga tends to run all their games (Farmville, MafiaWars) in this fashion, and are getting money hand over fist.

Getting Burned

At the same time, there have been numerous blog posts about how either freemium sucks, or they got burned by offering a fremium model.

One thing that continues to amaze me is how much people repeat previous errors and are shocked that they don’t work out.  I’ve played countless shareware games.  Most of which I can’t even remember.  In addition to games, I’ve downloaded countelss pieces of shareware for other purposes, again, I can’t remember any names.  (At one point, I probably downloaded every free-to-try task list/todo manager on download.com).  However, it very (and I mean VERY) rarely converted in sales for me.  I’ve donated money to a few free projects, I’ve also bought one or two pieces of shareware.  However, for the most part I have been able to get by with the free version.

For example, I mentioned above that I’ve download tons of ToDo List/Scheduler software.  Most of which didn’t last a week on my PC.  I bought a grand total of 0 of those.  However, there have been a couple I used for extended periods of time. The reaosn I never bought them was because quite simply, I didn’t need the features that were excluded in free version.

And this, I think, is where “freemium” breaks down. Too many people think that hiding features will cause people to buy their software.  Perhaps if I’m already paying $5 a month and for another $3-5 I could get added benefits it might.  But there is a much bigger gap between $0 and $5 per month, than there is between $5 and $10 per month.

I think where freemium excels is in games, especially games where a person is competing against someone else.  I might play for free for a month, and after a month, my friend consistently beats me when we go head-to-head.  Everytime.  No matter what I do, I lose.  Then one day, I see that for $5 I can jump 10 levels, which will turn the odds in my favor.  I quickly PayPal them $5 and promptly beat my friend. 

Why does this work? Because I’m emotionally invested in this.  The feeling is “Yes! I’m finally going to beat that guy!” It’s not “Oh, I can print in landscape if I donate $5.”

Another problem with the freemium model is that there are a lot of copy-cats.  But they’re not straight copy-cats.  So maybe you design some online todo list. And for free version, I can have 50 incomplete tasks.  For $5 a month I can have unlimited incomplete tasks.  You will have a competitor that gives me unlimited incomplete tasks, but won’t let me share my list via Twitter.  I look at the features and say “I don’t need to share it on Twitter.  I’m switching.”

It basically boils down to, in order for freemium to work, the user needs to be emotionally invested in the software, and it’s really hard to get people emotionally invested in software.

tl;dr

To answer the question is Freemium the new Shareware?  Yes and No.

Freemium can be used successfully as a way to monetize software.  But it’s not for every application.  If the free portion of the freemium is mismanaged, it’s no different than shareware.  As a result, you shouldn’t expect to get any richer than the richest shareware developer (and I have no clue who that is — which should say something.)  

Ultimately, you need to know your users.  Know who you’re targeting.

 


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