what is freemium 
a combination of the words free and premium freemium is a type of business model that offers basic features of a product or service to users at no cost and charges a premium for supplemental or advanced features a company using a freemium model provides basic services on a complimentary basis often in a free trial or limited version for the user while also offering more advanced services or additional features at a premium understanding freemiumunder a freemium model a business gives away services at no cost to the consumer as a way to establish the foundation for future transactions by offering basic level services for free companies build relationships with customers eventually offering them advanced services add ons enhanced storage or usage limits or an ad free user experience for an extra cost the freemium model tends to work well for internet based businesses with small customer acquisition costs but high lifetime value it allows users to utilize basic features of a software game or service for free then charges for upgrades to the basic package it is a popular tactic for companies just starting out as they try to lure users to their software or service since the 1980s freemium has been common practice with many computer software companies they offer basic programs that are free for consumers to try but have limited capabilities to get the full package you have to upgrade and pay a charge it is a popular model for gaming companies as well all people are welcome to play the game for free but special features and more advanced levels are only unlocked when the user pays for them freemium games and services can catch users off guard as they may not be aware of how much they or their kids are spending on the game since payments are made in small increments the term freemium is attributed to jarid lukin of alacra a provider of corporate information and workflow tools who coined it in 2006 1advantages and disadvantages of freemiumfreemium business models are popular and have the advantage of acquiring a large set of initial users under a pressure free trial especially when there s no cost associated with trying out an app or a service most people are willing to take a new app or service for a spin giving the company an easy way to acquire potential users and study their usage behavior in many cases companies still benefit from their free users though these users may not be explicitly purchasing upgrades or items the company can collect their user information and data show them ads to make revenue and boost their own business numbers to continue to enhance the application especially for startups or companies that are trying to build a following for their product the freemium model brings a large amount of brand awareness while not having to provide a lot of customer support on the flip side some of the disadvantages of the freemium model are that free users never convert to paid users ultimately though some companies are perfectly happy with their free users and have accounted for these free users to make up a majority of their forecasted earnings through their ad consumption or time spent on the app they may offer too many features on the free version that prevents users from ever upgrading to the premium version in addition users may eventually get tired of a free version as it doesn t offer additional bells and whistles but encounter other barriers or an unwillingness to upgrade to the premium version companies can easily acquire potential users and collect their user information and data companies can make revenue on ads and boost their own business numbers to enhance the application for startups it provides a large amount of brand awareness without requiring a lot of customer support free users never convert to paid users too many features on the free version may prevent users from upgrading to a premium version users may get tired of a free version that doesn t offer additional bells and whistles 