Douglas P. Handler

Douglas P. Handler
The Emergence of the ‘Freemium’ Market

A new type of market structure is needed to explain a zero or marginal cost, technology-delivered services market. The answer is a freemium market structure. As the name suggests, services offered via a freemium model are segmented into “free” and “premium” offerings. With essentially zero costs for serving additional customers, there can be a significant amount of entry into a freemium market once technology and programming costs have been met. The successful freemium product seller survives by offering free products and services that create a sufficiently large market base. A fraction of that customer base is then upsold to premium products that contain differentiated value offerings.