The Analysts’ Freemium Nightmare

I'm starting to pity economists, beyond the whole "how did so many of you morons miss the economy melting down" thing.  I'm feeling bad for them because they've got to try and analyze a lot of crazy trends in the actual working parts of the world economy, and things are changing rapidly and are far more distributed.

Last column I speculated on the various facets of Freemium ( that I feel need to be further explored and understood.  I'm quite enthused about the model and feels it holds great promise.

Now assuming Freemium is the wave of the future, as opposed to a tiny splash in the big ocean  of pricing models that lies on the shores of weird economic metaphors, there are going to be changes in more than just how we sell and buy.  There will be changes in how people analyze economic information, from understanding sales, to evaluating the performance of an industry.

I've got to imagine that for economics and business analysts that as exciting as a new pricing model is, this is one that's going to be a complete nightmare to analyze.  Think of all the things they have to track:

  • How many "free" units of whatever product is given away.
  • How many "free" units of whatever product is given away yielded purchase?
  • What features and content sold when, to whom?
  • How popularity of individual features and content waxes and wanes (try to imagine juggling economic projections for 5 or 6 different features).
  • Demographics of who buys what – split among the different parts and content of the product.
  • Which pricing plans for features sold when?
  • What virtual items in your online store sold, how long did it sell, and can it do better in the future?

All the people that have to analyze this – and more – in the Freemium models have my honest sympathies.  This can't be easy, and as different models get tried, it's going to get more nightmarish.

For those of us in professions that use Freemium – or may – keep in mind:

  • Analyzing this stuff is going to be a pain.  Show some sympathy to the people who have to do this at your company, business, or service.
  • Finding numbers from other businesses, products, and so on for comparison could be incredibly hard to analyze and project on.  Or to put it more crudely, looking at your competition may be nearly impossible.
  • Good economic modeling and projection may require more complex tools.  You programmers may have to help make them, or you Spreadsheet Gurus may find yourself called on more often.
  • Any seemingly useful news article on Freemium is best analyzed with some skepticism, since analyzing it is, as noted difficult.

Freemium is interesting and intriguing, but I have to say it's not always going to be easy for the number-crunchers and analysts.  That means it won't be easy on those of us not doing economic analysis to figure out what's relevant or even true.

– Steven Savage