Freemium Model

A Freemium Model is a business strategy in which a company offers a basic version of its product or service for free while charging a premium for advanced features, functionalities, or services.

It’s like a tiered system: there’s a free plan with limited capabilities, and then there are paid plans that unlock more features and benefits.1

Visual Representation

freemium model visual representation


The main goal of the freemium model is to make it easy for people to start using a service or product without having to pay anything.2

Companies let users try out the basic features for free, hoping they’ll see the value, and decide to pay for more advanced features, better functions, or to get rid of ads.

This way, companies can attract more users, keep them around, and make money.3.

How It Works

Here’s how a freemium model functions:

  1. Start for Free: You can use the app or service without paying anything. This free version is pretty good but has some limits.
  2. Getting Used to It: As you use it more, you start liking it and using it often in your daily life or work.
  3. Seeing What You’re Missing: You notice some extra features or perks you can’t use because they’re locked behind a paywall. These could make the app even better for you.
  4. Thinking About Upgrading: The app keeps showing hints or messages about what you’re missing, making you consider getting those extras.
  5. Deciding to Pay: If you choose those extra features are worth it, you can pay to upgrade and get them.
  6. The Company Makes Money: Although most people might stick with the free version, enough people pay for the extras to make the app company money.4


The freemium model is popular across various industries, especially in the digital and service sectors.

Here’s where it’s commonly used:

  • Software Apps: Apps for work or creativity might let you use basic features for free. If you want more options, more storage, or to work with others, you pay for a premium plan.
  • Video Games (Free-to-Play): Many mobile games are free to start but may limit how fast you can progress or what you can do. Paying can give you more resources, speed up your progress, or unlock special content.
  • Online Services: Services like cloud storage or music streaming offer limited features for free. Paying more can give you extra storage, features, or an ad-free experience.
  • Web-based Tools: Tools for design, photo editing, or learning languages might offer simple versions for free. More advanced tools, designs, or lessons cost extra.
  • Social Media Platforms: Basic social media use is free, but some platforms might charge for extra features like removing ads or customizing your profile.5


For example, a project management software company has a free version.

This version lets you handle tasks, work with a few team members, and use basic templates.

If you want more, like working with unlimited team members, using custom templates, getting detailed reports, and faster customer help, you can pay for a premium subscription.

This way, people who like the free version can pay to get more features.

Related Terms


1. Wikimedia Foundation. (2023, October 13). Freemium. Wikipedia.

2. Making “Freemium” work. Harvard Business Review. (2015, May 20).

3. Reime, E. V. (2011). Exploring the freemium business model (Master’s thesis).

4. Segal, T. (2022, December 26). Freemium: Definition, examples, pros & cons for business. Investopedia.

5. Software Business: 11th International Conference, ICSOB 2020, Karlskrona, Sweden, November 16–18, 2020, Proceedings. (2021). Germany: Springer International Publishing.

Scroll to Top