Skype is tweaking the freemium model

Following up Monday's post about the Freemium Rate, Hudson Barton wrote "in a normal 'freemium' relationship, it is the higher valued services that have a fee attached to them."

Most freemium services offer free but limp, shallow versions of their paid products. I show that on the chart below by the boxed "0" (free, few features) and the upgrade path to the boxed "$" (high cost, more features).

In Skype's case, that's not how it works. SkypeOut users call a voice line and pay for it by the minute or with a subscription. Skype-to-Skype users get free multi-modal talk (persistent IM, voice, video), file transfers, voice conferencing, public chats, audio fidelity far better than mobiles and landlines.

So Skype is making the free experience rich and sophisticated and full. On the chart, users start in the bottom-right quadrant (free, full features) and ADD SkypeOut (costs, simple features).

Skype has a pricing advantage in their freemium model. A year's national SkypeOut subscription can cost less than 10% of what people spend on land lines. So even Skype's premium charges are cheaper than many alternatives.

tags: skype, freemium, business, strategy, free, skypeout

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