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March 24, 2006
Dotcom biz model with no name gets one
Fred Wilson in his VC blog described a few days ago his favourite business model. At the time, it was without a name. It's the sales stragegy that involves giving away free access to a service, or software, and then offering a more advanced version for a subscription fee.
Examples of online companies successfully managed this model include Skype for IP Telephony, Box.Net for storage, and Flickr, for photo storage. And examples of software companies, include firms like MySQL and shareware vendors.
At the end of the post he asked readers for suggestions of what to call the business model and he was provided with plenty. So far Freemium seems to be the one he's chosen.
There is no denying that Freemium is a trend right now, so we will keep you posted if a) the term catches on; and b) startups beyond this handful can repeat it.
And c) more importantly if any of them emerge as corporations in their own right, that is, they don't get acquired before they've become profitable and proven than this is a great business model over the long run.
The alarm:clock euro would also like to note that there are software companies at the other end of the spectrum that not only charge right off the bat for their software, but even charge for a demo.
You'll find pictures of the packaging and data flow diagrams but you won't find a decent screenshot at trend-bucking Kalido.
OK, it is only one example of a company that does both, but we're now looking more actively for other examples.
The startup in question is Kalido, a Benchmark Capital Europe portfolio company. An entry-cost license is $350,000; maintenance is $60,000 annually. That is a trend-bucking sales strategy if ever there was one.
We recently heard one of the top execs at Kalido speak on a tech venture panel. The firm spun out of Shell and has about ten years of R&D behind it. The spinout took a lot longer to pull off than the developer team hoped but now that it's independent, business is booming and expansion into the US market was the current challenge facing management.
Read - Kalido Interview (Daily Telegraph)
Read - My Favorite Business Model (Fred Wilson blog)
Read - The Freemium Business Model (Fred Wilson blog)
Posted on March 24, 2006 08:42 AM | Posted to Business software | Online services | Permalink
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