Overheard: Freemium biz model explained

The Open Source Software vendors have a similar model where they offer the software for free download and sell consulting, maintenance and support contracts for revenue. Don Dodge, Freemium - Free to paid conversion rates

Don Dodge does a good job weeding through the Web 2.0 biz-speak and nailing down why the Freemium model could actually work for some start-ups.

Do the math. 100,000 free users convert to 3,000 paid users. They pay between $10 to $50 per user per month. Lets use $25 as an average. That is $75K a month or $900K per year. That is an excellent revenue stream for companies that typically have 3 to 5 employees.