The True Cost of Freemium: Your Privacy

We’ve all heard it said before, “If you aren’t paying for the product, then you are the product.”It seems the influx of freemium applications in recent years has given this saying a new level of meaning. What exactly is freemium? A combination of the words ‘free’ and ‘premium’, it is an internet based business strategy in which the publisher gives the core product away for free and sells additional features to a fraction of their following. An example of a successful freemium business almost all of us are familiar with would be Skype. For no cost at all, a Skype user can make audio or video calls to other Skype users, place Skype conference calls, or instant message other users. However after one has become more comfortable with Skype, they might see the value in being able to make calls to landlines through Skype, sending SMS messages, or receiving voicemails. All of which are included in Skype’s premium paid services.

The concept of freemium is ingenious and has proven fruitful in many cases, such as the one mentioned above. Further developments in technology are the foundation of freemium products. As the costs for running computers and connecting to the internet continue to lower, the price of digital distribution closes in on zero.  This means businesses are able to earn their customers’ loyalty before monetizing the situation. What does this mean for you as the consumer? Even for the most successful of freemium companies—like Skype—only 1.5% of their customers are actually paying. So how are companies benefiting by the other 98.5% of consumers that only use the free portion of their product?

The majority of freemium companies are fairly tight-lipped about the data they’re collecting, including how they collect it and who controls that data. Freemium products are about taking a fine-tooth comb through every step of the consumers’ buying process. This means careful inspection of customer reactions, and then responding to that data. Of course, data collection is often considered a necessary evil in the business world. In industries such as healthcare, education, or finance, very sensitive and personal information is at stake. Companies essentially granting themselves the rights to everything you do, say, or write by means of their product, is unacceptable.

Keep in mind that a freemium product is not the same as a product offering a free trial. A free trial means the entire product is free on a temporary basis. Whereas a freemium product is free at all times, users only pay in order to enhance their experience. In fact, 97% of mobile software applications are of the freemium business model. This strategy continues to expand beyond the borders of just the software industry. As businesses continue in their experimentation on an endless number of volunteers, don’t risk your privacy by making uninformed decisions.

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