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Why Microsoft continues to embrace the freemium model

Paul Rubens | Feb. 4, 2016
Microsoft's business strategy for the cloud appears to amount to this: ‘Be more like Apple.’ Here’s why that approach works.

When it comes to the cloud, Microsoft is taking a page out of Apple's playbook.

For evidence, look no further than Chris Capossela, Microsoft's chief marketing officer. Speaking on a recent podcast, he talked about users of the company's cloud products experiencing "the delight of the engineering work." And if that word "delight" sounds familiar it's probably because it is one that Apple loves to use. As in "surprise and delight." Or "The first thing we ask is: What do we want people to feel? Delight. Surprise. Love. Connection."

Capossela also uses the word "love" in relation to Microsoft's products,  but there are other ways too that Microsoft seems to be aping Apple: It's using a "five minutes to wow" – as Capossela calls it – design goal for some of its cloud-based business apps, and it's adopting a freemium model for many of them too.

That looks similar to the way many games are sold in Apple's AppStore. However, the reality is that 40–50 percent of apps downloaded from the AppStore are deleted within 45 seconds of being downloaded (according to code marketplace Apptopia), so successful apps have to be easy to understand and appeal to users very quickly. That's 45 seconds to wow, in other words, instead of Microsoft's five minutes. And many games are offered available free to hook users, with in-app purchases offered to unlock more levels, features or functionality. Or freemium, to put it more succinctly.

"If you are going to be successful in the cloud you need to provide a service that anyone can get started with, they can sign up for in 30 seconds and they can be blown away within the first five minutes and then they start using the thing," Capossela said. "Making the product free, or some set of the functionality free, is a very important way to make that happen."

Getting started with an iPhone app is as simple as pressing a button to get the app, and possibly entering a password. Microsoft is aiming to make its cloud apps just as easy to access.

"You have to make the sign up process and the first five minutes really smooth and easy," Capossela said. He added that if the sign-up process requires a phone call to Microsoft or for some procurement person to do something then these cloud services simply won't get adopted.

Making ‘freemium’ work

Microsoft's hope is that the right users – leaders in their departments – will get hooked on the free product, and then push the necessary people with purchasing authority to drive though adoption of the paid version of the product.

"Hopefully we are smart about what we put behind a paywall so they will run into some reasonable limitation to the free product that will lead to a procurement discussion – but you can get people to fall in love with the product by making an important set of the functionality free."

 

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