SmartPulse — our weekly nonscientific reader poll in SmartBrief on Social Media — tracks feedback from leading marketers about social media practices and issues.
As a monetization strategy for Web-based applications and software-as-a-service companies, freemium as a business model has grown in popularity rather significantly over the past several years. Companies such as 37signals have mastered it and created products with millions of “free” and paid users. While it has its challenges, it’s becoming the de facto approach in the social, mobile and gaming industries, with many more industries also considering how to apply it as a strategy.
So this week, we asked: Would you pay for access to a third-party client for a social network if it promised features and services not available through first-party tools? We received these results.
- No, I would not be willing to pay for such a service: 53.51%
- Yes, I’d be open to paying for such a service in the future: 23.68%
- Not sure: 12.28%
- Yes, I already pay for such a service: 10.53%
To say the least, I was surprised that more than 50% of respondents stated they would not be willing to pay for such as service. Take Twitter as an example. If used for business, the network’s native app simply does not meet the demands of the enterprise from an efficiency and ease-of-use standpoint. The user experience simply does not take into account the enterprise application of the service.
It’s these holes in the first-party tool’s functionality that have given rise to the third-party app ecosystem. In this specific context, three applications come immediately to mind: HootSuite, CoTweet and TweetDeck, now owned by Twitter.
Let’s take a quick look at HootSuite, one company thriving using the freemium model. HootSuite is a “social media management system for businesses and organizations to collaboratively execute campaigns across multiple social networks from one secure, web-based dashboard.” In brief, its pricing model has two levels.
- HootSuite Free: One user, manage five social media profiles, free quick reports.
- HootSuite Premium: $9.99 a month, three users, unlimited social media profiles, Google Analytics integration, Facebook Insights integration.
- Additionally, HootSuite generates revenue by requiring licenses for more than three users.
HootSuite’s two-pronged approached to pricing involves placing a value on creating an ad-free user experience and — again filling a hole left by Twitter’s inadequacy as a product — providing a sophisticated product that serves the enterprise. Both of these have led HootSuite on a tremendous growth trajectory. As reported on HootSuite’s blog, the HootSuite registered-user count is well more than 4 million, with a 96%-to-4% free-to-paid user ratio. Doing the quick math, that is approximately $19 million a year in revenue. (Pretty good, no?) This example gives a quick look at the reason some of us are willing to pay for such services: They fulfill a specific need in a market. It is what caused my surprise at the results. HootSuite is only one example of such service.
Am I just an early adopter? What do you think? Do these numbers feel right to you?
This poll analysis was written by SmartBlogs contributor Jeremy Victor. He is the president of business-to-business content-marketing agency Make Good Media and editor-in-chief of B2Bbloggers.com. For more of his writing, visit B2Bbloggers.com and follow him on Twitter and Google+.