Global Insights and Trends
Peter Jarich Peter Jarich
Current Analysis
Vice President,
Consumer and
Infrastructure
From Premium to Freemium…and Back:
Innovation and Monetization


Enticing consumers with freemium services to lead them on an upgrade path to premium services seems like the monetization model “de jour.” But does it spell innovation for carrier consumer services? Our observation: it’s important, but just one component. The freemium model – enticing users with free introductory services, then charging for added features or usage – is commonplace in the OTT world. It’s well-understood. It’s generally proven as a strategy for engaging new users. And, while they might get credit for popularizing the freemium model, it’s not just a strategy for OTT players. Around the world, carriers are getting in on the game. But, there is also a potential danger in embracing freemium to the detriment of other efforts.
For example, late last month we took the opportunity to profile New Zealand’s Terrible Talk as a part of our Innovation IMPACT service. You can be forgiven for not having heard of Terrible Talk. New Zealand is, quite literally, in a rather out of the way corner of the globe and most people assume its population of roughly 4.5 million people isn’t big enough to support significant, innovation-incubating competition.
Like a traditional fixed-line carrier, Terrible Talk offers voice and data services. It targets residential and business users. It can even deliver fiber-based services. Where it breaks from tradition is what it does with its profits; it invests its residential profits into social and environmental causes – think groups like Oxfam New Zealand. And how does it earn those profits? By giving away services. Home plans, for example, start at $0 per month. Go over 10 GB of data and fees kick in. If you want fiber access or go over the 50 GB data allowance and your fees are slightly higher. As novel as this might seem, it isn’t really that unique. Similar schemes apply to business access services.
US = T-Mobile’s Simple Choice Unlimited Worldwide Data and Texting. Unlimited international data roaming and messaging to 100+ countries as a part of the carrier’s Simple Choice rate plans. Abroad, data speeds are capped to roughly 128 Kbps with faster HSPA speeds available for purchase.
Europe = 3 Austria’s Initiative 100%. Positioned as an initiative to help bridge the “digital divide” between Internet users and the unconnected, the plan includes 20 MB of free data per day along with a free SIM. Add-ons kick in for users going over the daily data allotment.
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Middle East / Africa = Telecom South Africa’s SoftCap Add-ons. Zero-rated movie content offered to fixed broadband subscribers on plans with a 5GB/month cap or higher – free until March 2014. Gaming content (again, uncapped) available free for 30 days
There’s no shortage of examples of carriers trying to take a page from the OTT playbook around things like IP comms or making money from digital advertising. Carrier freemium pricing models, however, are doing more than just aping the OTT’s they often seem so envious of. From upsells, to limited time offers, to free content in the service of hardware and service sales, there’s a diversity in the models.
The risk?
Ultimately, freemium is all about pricing innovation; it’s a new way to price services and entice users to adopt a service. It does not necessarily imply service innovation. If seen as a panacea for operator ails, then, it could cripple service innovation efforts. That would be a mistake. Luckily, this doesn’t seem to be the case; up through the start of this month, freemium monetization schemes represented only 3% of the services tracked in our Innovation IMPACT database. Of course, we’ll be continuing to follow the evolution of this strategy as new services appear, eager to see if the success of services using the freemium model impacts other innovation efforts.
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Jack Zimmerman
Senior Vice President, Global Sales
jzimmerman@currentanalysis.com
+33 (0) 1 41 14 83 15
Donna Simek
Vice President, North American Sales & Services
dsimek@currentanalysis.com
+1 508 785 2262



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