Using freemium, companies are able to offer their products and content for free to some, while others can pay extra for advanced features and capabilities. One tech startup testing the freemium waters is HootSuite, whose product of the same name is a dashboard allowing teams to manage all their social media accounts in one place.
HootSuite's CEO Ryan Holmes, a speaker at mediabistro.com's upcoming Freemium Summit East, can talk about why his company has decided to recently launch a freemium paid content model -- "we didn't want to cannibalize our growth" -- but don't ask him to give other companies advice about using freemium. At least not yet.
How did you go from restaurateur to tech entrepreneur?
I sold the restaurant in '99, and I was always interested in computers. Web was blowing up at that point, so I basically self-taught on HTML and managed to put together a decent enough portfolio to get a job at a dot-com. I worked with them for about six months and honed a lot of my skills there to a point where I was able to found Invoke.
How did HootSuite get off the ground? And how did it get from there to where it is now?
Invoke was working on a bunch of different social media campaigns for clients, and we needed a tool to help better manage our campaigns for our team and our clients. We were looking for a tool and we just couldn't find one, so we decided to start building one. That was really the inception of HootSuite.
|"[People] say, 'Oh my god, you're with HootSuite, I use your product every day.' And it's funny because I don't think anyone gets that passionate about like, 'Oh, you're with Outlook, I use Outlook every day.'"|
One of the most interesting things about HootSuite is its use of the freemium model. How does it work, and why did you choose to go in that direction?
By the time I speak at the conference, I'll have a lot more information for people. We just launched it for new users. We're investigating how it's working for people and seeing what they're liking and what they're hating, and having success so far. We decided to go with freemium because we didn't want to cannibalize our growth, so we wanted to keep the product free. We think it's important to have a strong base of users out there who are passionate about the product, and we have very passionate users and loyal fans who use our product every day. We go to conferences and meet people there, and [I] introduce myself and it's really amazing to see people's eyes light up. They say, "Oh my god, you're with HootSuite, I use your product every day." And it's funny because I don't think anyone gets that passionate about like, "Oh, you're with Outlook, I use Outlook every day." Or "Oh, you're with Firefox, I use Firefox every day." So we have really great fans and users who ultimately evangelize for us. And then on the paid side, we have people who really need good user functionality and a solid tool, and we're able to provide that for them… We always had plans to monetize through freemium.
How does it work? If you're joining and you're a new user, you can choose to upgrade to paid use?
Exactly. It's free for -- we're actually thinking it's going to be free for about 95 percent of our users and paid for 5 percent. The pay wall usually shows up based on the number of paid users so if you have a large teams you're going to end up being on the pay plan, or you can reduce your team size down… but that's kind of one of the big matrix of payment. We have other features like support and increased analytics that also go with the pay plan.
|"We decided to go with freemium because we didn't want to cannibalize our growth, so we wanted to keep the product free."|
What percentage of HootSuite's users are companies versus individuals?
We have a lot of companies using it. We have a huge base with small and medium enterprise users. We have power users as well, but for the most part, we don't have consumer users, we have users who need bigger better tools. That's really where our base was at. In terms of actual numbers, I don't have the statistics offhand. It's really hard for us to tell, even from looking at our data, where the business versus power user split is.
How does HootSuite make money besides freemium?
Through the history of Invoke we have built new products that were successful from day one. So we built out an e-commerce platform, we sold it to a client and they continued to sell it. Same thing with our video conferencing platform. With HootSuite, it was a little bit different. The launch was moving so quickly, we had a small team dedicated to it, but we just needed to keep our velocity up. So we kept that going for over a year of bootstrapping it, self-financing it. And then it got to a point where it was blowing up and so it made a lot of sense to take on some investors. So we took on investment in January 2010 and we continued on with that. But our goal is to get to profitability, and we're pretty much there.
A lot of media companies are trying out freemium. Why do you think freemium is a good choice for media companies?
I think that with regards to media, I'm not sure it is [a good choice]. But I know for products, it definitely is. I think it can be a good way to get people in and get eyeballs on your products, or content for media companies. I think it's one of the proven models that's out there right now. But right now there's definitely more that will be discovered, and we're at an interesting point in time for the discovery of new ways.
Do you think media execs are rightfully worried about getting users to pay?
We're definitely going to see a reinvention of media companies. One of our investors is a media company: Hearst. So they're looking at diversification in this era; the way that media is distributed and the content that is being created have completely changed. And if you don't adapt, you become a dinosaur, like the music industry. If they had their way, everybody would be going to retail music stores and buying jewel case CD albums. But I think the video industry learned some things from the music industry and kind of adapted. With the media industry or content and publications, I think they're diversifying a lot and they're looking for other ways of creating content, different models, and I think that they're actually appearing to be the most adaptable in a lot of ways.
Ryan Holmes details how to make the transition from free to freemium at the Freemium Summit East on October 25 in New York City.
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This interview has been edited for length and clarity. The foregoing is the sole property of WebMediaBrands Inc. The opinions and views expressed in the interviews and/or commentaries are solely those of the participants and are not necessarily the views of WebMediaBrands Inc., its affiliates or subsidiary companies.