Lately there is been quite a bit of bashing of the Freemium model. The last example is given by Ruben Gamez of Bidsketch. While he makes some good points, his rhetoric seems incomplete, if not flawed, to me.

I am very glad that he’s making more money now than before, but chances are that something in his Freemium model was terribly wrong and he was literally cannibalizing his business with it. What I would have liked to see in his article is not just a pie chart showing how many free vs paid users he had. That’s pretty useless data.

The breakdown in active users vs non active and the cost of each sector in total and by user would have been greatly useful for starter. The delta in drop off after the removal of the free plan. The growth rate not just for the first month after removal but for the months afte that. Then his pie chart would have been much more meaningful.

Let me explain:

If 99% of his users are Free and 99% of that doesn’t use their account, his cost for them is very much close to $0.

They might not be the right customers. They either will never turn into paid customers or it’s the wrong timing for them.

They might like the product but they have no use for it right now. Chances are they will recommend it to other people. I love DabbleDb, I have the free account, I never use it and don’t have a use for it. Recommend it to dozens of people. My wife is a paying customer of theirs.

Ruben’s cost for them in this case is the disk space required to store their login credentials, totally negligible.

If your product is good, a portion of those free users will spread the word and you can chalk up that expense to marketing. I have multiple free accounts with the usual suspects, basecamp, wufoo, chargify, etc. that I don’t use but I like. It’s for me to explore and evaluate their product. While I don’t buy personally I do recommend them to many people that end up buying or I might buy with the corporate account. (hence I don’t result as a conversion)

(Possible Scenario) If only 1% of the free users are active and 0.8% of all free user accounts are converting. It really means that 80% of your free users account are converting. Which one is it, I don’t know. Not enough data was shared in Ruben’s article to make that determination.

His says:

If I stayed on this path, I’d soon have thousands of free users to support.

Why? You don’t have to support free users. You do if you want to. Don’t feel pressured to, though.

Here is an idea:

• Make it clear at signup that only paid customers gets free support.
• Free customer gets paid per incident support. Your time is valuable.

Now for the opposite case:

If 10% or more of that 99% users were actively using the product. By actively I mean they use it at least as much as the paying customers. Beside that your conversion would still be pretty good, 0.8% of 99% with 10% active users is ~8% conversion, enviable. Chances are you either priced the premium plan wrong or your free plan is too good. It might be in fact so good that you could charge for it.

The right thing to do at this point would have been to a/b test charging for the free plan let’s say $2-$7/mo and see how many people signed up for it. You don’t even have to code the logic for it. Just test their behavior, then if people are purchasing you code it to charge. Grandfather those accounts or charge them later.

Still chances are that you needed a shittier free plan. Coming up with a free plan that works it’s not easy and it require a certain knowledge of human psyche and good analytic data.

If 40% or more of the free accounts were active you can be sure that your free account was too good and users didn’t need anything more than that. That was a plan you could have charged for.

Btw, there are many ways to make a free plan that still makes you money or that at least it doesn’t costs you anything.

How about: Ad-sponsored free plan.

For the first 2-4 weeks let them experience the site without ads. Then use transitional ads very much like wired, cnn, msnbc, monster.com. (click here to continue type) Don’t want them, feel free to upgrade. People will either drop off, upgrade, or painfully continue and generate revenue. Still these users are squatters and don’t get free support. No need to be a dick to them but make it clear that you’re busy supporting paying customers. If you want to be evil, alternate about 5-10 interactions without ads with just as many with ads. The constant alternating of showing ads/slowing down with free flowing is a really painful thing to experience and clinically proven to be much more irritating than continuous slowing down.

When you show ads all the time, people get used to it and get accustomed to them. They become white noise and the users block them off. If you alternate they can’t get accustomed to it. Beside making them more irritating they will become also more visible. If you don’t expect it, you’ll notice it more.

Promote to use

Make them tweet a predetermined phrase of praise to use the product every once in a while a-la macheist. If they won’t give you money, let them bring you users that will.

DabbleDb used to offer a free plan where all the data was public, if you can’t live with that, signup.

How do you curb the fakers and abusers? Tie their account to their twitter/facebook/disqus account. Let them login through a pre-existing account like facebook.

Imagine you’re this user, and you don’t upgrade what are you going to do? Are you really going through the trouble and pain of creating another facebook account just to have another free account. If you do, again it’s a clear sign that the free offering is too good and you could charge for it. Reduce the free plan even more.

If any free product is too good then by all means, don’t offer it.

If I were bidsketch, my free plan might look like this:

Proposals 1/month, 1 client, 1 user. No embed images, no custom domain, yes export to PDF, maybe templates and themes, no brandable proposals.

Lastly one more thing to consider is the churn rate. What’s the delta in churn rate after removing the free plan. If with the 8x registration growth you experience a similar churn rate you’re monetizing those free user for just a month or 2. You might still be leaving money on the table by not having that marketing working for you.

I have so many questions:

1. was the removal done as a part of an a/b test? if not could the 8x increase due to something else? a positive review perhaps.
2. Has the growth rate kept going at 8x vs previous month or is it just the new plateau (before x signup/months now 8x signup per month)?
3. Has the growth rate decreased?

and many more.

The strength of a carefully thought out Freemium plans is not in the make money in early stages or the business model. Its strength is in the getting the word out and people to talk about your product.

First of all: It’s a marketing strategy, folks! Not a business plan.

A marketing strategy that will change over time. Once the word is out and you’re profitable, and having a free plan doesn’t really bring any more benefits: go ahead and remove it. It has done its job. It’s time to apply a different marketing strategy.

The one thing that I heartily agree with Ruben is to not blindly copy other people’s strategies. What worked for them at a moment in time and space, might not work for you or even be reproducible. Every niche and period in time needs the appropriate strategy.

If that wasn’t true, why don’t you go ahead and try to follow Bill Gates steps, exactly like he did. Go to IBM right now and try to licence them a DOS-1.0 like product. Why not? It worked for him, right?

Times have changed and continue to change at ever increasing pace. Strategies from 1 year or even 6 months ago might not work anymore.

Make your own, chances are you’ll understand it better and you’ll own it.

This weekend I listened to “The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home” by Dan Ariely. Once again Dan writes, with a really witty and friendly prose, an important look at how we make decisions. Although it seemed there weren’t really many upsides I think that some of them were left to us to conjure. He does make some examples but he probably should have done more so in each chapter.

The hope in many cases is either that by knowing our irrational tendencies we’d be able to recognize the pattern and not make the bad calls. Or use the irrational tendencies to architect our decisions in a more constructive matter. I am big on the second strategy, choice architecture.

The best part for me was with regard to how our emotions have a long lasting imprinting on our decision making so that we might not just make a rash, irrational DECISION on the moment, because of our particular, and completely unrelated, state of mind, but later we’d make another bad DECISION based on the previous one. Long after the emotional feelings have faded the decisions are left there to coerce us. Causing an avalanche effect of bad decisions all caused by something completely unrelated.

Bad emotions causing bad decisions causing bad decisions causing bad emotions.

There were plenty of chapters to which I could directly relate and could use immediately. Chapter 2, “The Meaning of Labor”, in particular struck a chord with me because of my previous experiences. I am highly motivated by the meaning of my effort.

The 2 most depressing jobs that I held were at companies where my work would get continuously get discarded or shelved. The second position lasted for 4 years where I’d slave over project after project and they’d all be shelved before launch. In total close to 6 years of R&D with very little to show up for beside experience.

These experiences left me looking for meaning more than anything in my work. In a way I have been scarred for life.

In fact if I don’t see a strong meaning in a particular task given to me, it’s very hard for me to motivate myself and do it, no matter the amount of money you throw at me. If I receive too many, I’ll just quit or facilitate the elimination of my position.

In general I can draw many parallels between the concept discussed in the book and my personal and professional life. How to motivate my kids, myself to do chores. How to market and connect with the visitors to my sites. How to write marketing copy that sells. Ideas for future businesses. How to evaluate what I want to do when I finally grow up.

I give a 4.5 out 5. Buy it, read it, use it.

In the meantime I am going to give a second listening and this time I’ll jot down the ideas when they comes.

He can cause singularity events at will

Tom created myspace to become his friend.

When your internet goes down it’s because he is sad.

When he hiccups, google’s infrastructure does too

Everybody is joining Twitter to follow him, while he doesn’t have an account, they still get his updates

You came to the realization that you were following him and getting his updates well before joining twitter. You joined twitter just to make it official.

Twitter follows him

He came up with the google page ranking algorithm & gave it to Larry Page & Sergey Brin as a practical joke to Yahoo.

For as much as you might look for it, you’ll never find a button on facebook that can poke him. If you were to find it and click on it, the internet would implode.

He’s not a proponent for net neutrality, he IS net neutrality

He delivered happiness to Tony Hsieh and wow to Zappos

His personality is so magnetic he’s not allowed entrance in data centers

His code is so awesome, it can find and fix other people’s software’s bugs without the need to be run

The seti project is still trying to replicate the computation he did in his mind during one breakfast

His twitter followers’ growth rate surpassed infinity … over 0

20 years before his birth he appeared to J.C.R Licklider in a dream, and explained the concept of universal networking. The ground work for the internet was underway.

if we could capture the energy produced by his brain activity for 1 second, we could power the whole internet … forever

It is said if he were to talk to you, all your present, past and future code would be eternally beautiful and free of bugs.

Sergey Brin, Larry Page, Bill Gates and Steve Jobs used to be figments of his imagination. He then breathed life into them.

It is said if he were to take off his glasses he could stare into your soul and reprogram it. Even over skype.

He doesn’t need glasses but wears them anyway, for your protection

If skype didn’t exists, he would appear to you and still conduct his interview and you’d better answer his questions

He doesn’t need ITunes to promote his show, ITunes begged him to.

If you were to subscribe to his show, nothing else is required from you to receive it. Not even an internet connection

His shows are so powerful no storage media can hold them, they just persist

When he’s happy, every programmer in the world is in the state of flow

His smile is so radiant that when he does smile, all the tests in the world are compelled to pass … they oblige every time.

His shows are so perfectly edited because he created them in his own image

If you play one of his shows on your computer, it will be over-clocked forever.

His words are so powerful you can use them to jumpstart your car

You can only quote him, for his words are perfectly arranged and any summarization would cause computers all over the world to crash

No action can speak louder than his words

His computer never crashes because it doesn’t want to make him sad.

Once he ordered his computer to crash, to experience what it felt like.

He once caught a lightning in a bottle, to prove it could be done,  he then let go of it, so he could catch it again.

His podcasts are so electrifying if you’d play them on your laptop you’d never need the battery anymore.

Don’t argue with him, because when push comes to shove, you’ll be doing both .. to yourself.

His podcasts are self-aware

He doesn’t use any recording tools to record his shows. The microphone & headphones are just for show. To make you feel better about yourself

You don’t need to download his podcasts, they regularly visit your device to evangelize his word

He doesn’t ride with the bulls in spain, the bulls in spain ride with him

The butterfly effect can be observed around the world every time he blinks

When people talk about standing on the shoulders of giants, they are referring to him

“A fresh pair of eyes” is what you get every time you watch his show

He can talk how much he desire and still be wise. Proving that “A still tongue keeps a wise head” expression doesn’t apply to him

He can accurately and correctly compare apples to oranges

He is: The Most Interesting Web Personality Of The World.

A couple of weeks ago I finished reading “Delivering Happiness: A Path to Profits, Passion, and Purpose” by Tony Hsieh. It’s a great book and I recommend it to anybody curious about Zappos or on how to build a culture within a company.

I found the book refreshing in its honesty. I was surprised with Tony’s poor ethic as an Oracle employee and many more revelations about his character and Zappos’ history.

It clearly explains his journey through life, what influenced him, what occupied his mind and his mistakes. It’s truly a classic 3 act hero story. Throughout the book I really felt for him and his company and recognize that the emerging group, the people made it through the downturns and stuck with it, are really the reason Zappos is such a great company. Their experience must be, emotionally, pretty close to that of war veterans. Those people must have been like a band of brothers/systers. In my mind, without those hard times, Zappos would have not bred the current culture. Fortunately, with the help of this book, you won’t need to go through a long war-like period to breed a culture in your company. You can just gain the wisdom from Zappos’ experience.

My only critique: there is a small section of the book, about 20-40 pages that I though it could have been written differently to seem less like propaganda, but overall the book was outstanding.

It’s a quick read, with lots to learn and I suggest it heartily.

I don’t think this is a real one like Black Dynamite. Still funny

Yesterday at the boca raton ruby meetup I showed off some hacking that I did about 3-4 years ago when I was exploring ruby meta-programming as many people were doing at the time.

It was the period of _why, markaby and the poignant guide to ruby.

In that period I used to take the train to work, ride it for about 90 minutes, work a full day, go to happy hour with the CTO of the company and then ride the train back. During the ride back home I’d write a “column” that I entitled “Drunken Ruby Master Technique” where I’d try weird ruby syntax and coding styles.

Last night I revived such articles that gave me gems like this:

Here are the links to the original articles:

• Drunken Ruby Master Techniques
• more Drunken ruby coding – part 1 – splat and more
• more drunken ruby code – part deux Hashes

Not everything has real applications of course, but I thought at the time they were interesting findings.

I think it was really _why that inspired me to explore for language idiosyncrasies like the following and just have fun with it.

[*{"a" => "string"}] #=> [["a", "string"]]
[*{"a" => "string"}].first.class #=> Array

[*["a" => "string"]] #=> [{"a" => "string"}]
[*["a" => "string"]].first.class #=> Hash

Thank you _why, we miss you.

In May I added a google analytic line of code that should be used when tracking users among different subdomain under the same profile. The call in question is setDomain. I went through the documented steps (http://code.google.com/apis/analytics/docs/tracking/gaTrackingSite.html#domainSubDomains) and pushed it to production. I have used this functionality successfully previously.

About a month later I realized that line of code was completely screwing up with my analytic reporting. Was was happening is that google would view a portion of my traffic, if not all, as if, whenever they’d click on a link on the site, the user would leave the site and then come back on the page that they actually navigated to. This pretty much made every single page on the site a landing and an exit page.

This inflated a bunch of data, bounce ratio went up to 98% for most pages, unique visits & % new visitors were inflated and the page per visit went down accordingly. The only traffic that was tracked correctly was the ajax call that I was tracking. Since there was no change in url they didn’t count as exit/re-entry.

I looked through the GA googlegroups posting and apparently I wasn’t the only one having this problem.

• http://www.google.com/support/forum/p/Google%20Analytics/thread?tid=58005f1c2bfc8eb6&hl=en
• http://www.google.com/support/forum/p/Google%20Analytics/thread?tid=5a26a972b7a2dfe9&hl=en
• http://www.google.com/support/forum/p/Google+Analytics/thread?tid=0a61f450744f00ae&hl=en

The shocking part to me is that nobody from google posted a reply. I tried a bunch of possible remedies in vain.

So just as a buyer beware post, if you’re using this directive make sure it works, check your bounce ratio for the next 2 days.

As you can see from my graphic below it’s pretty obvious the effects of this seemingly innocuous function call.

Inflated reporting as a result of setDomain

Use at your own risk, really.

Ran into this beauty and I think I’ll enjoy it thoroughly.

You can watch it on netflix