Under the moniker "cheapium", Jared Brown proposes a simple and useful idea:
Freemium is the most popular business model among web startups and it's broken. Freemium is a money burning business model (...)
Cheapium works by offering basic features for a nominal cost, usually a dollar or less, while charging a premium for advanced features. This can be in the form of a one-time or recurring fee. Cheapium creates a low, but not trivial, barrier to entry. All users in the system are paying. It might sound like a small difference but this has several advantages over freemium.
It's a very good point. As Jared points out later, price is not just a signal, but also a selector. The people who are willing to pay even $1 for your app are often a different set of people from those who are willing to pay nothing.
Case in point (as anecdotal as it might be), when browsing the App Store, I tend to look mostly for paying apps. I'm willing to pay for the right app and unwilling to spend my time on an app that probably isn't right for me.
Be sure to read through the whole article for Jared's other thoughts.
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