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Freemium, disruption and the mobile phone industry

The US mobile phone industry is certainly ripe for disruption as anyone locked into a 2-year contract is well aware.

It was only a few years ago that number portability became the norm, a feature most of the rest of the world had adopted eons ago. Along comes FreedomPop - funded by the founder of Skype and a Vindicia client - to disrupt the entire $100 billion industry via the freemium model. Can it work?

Launching its service earlier in the week, FreedomPop enables any consumer to get 500MB of of 4G data for free via an agreement with Clearwire and its network. Consumers can also pay a monthly subscription to get access to greater amounts of monthly data and presumably faster download and upload speeds. Its long-term success as is the case with most freemium models, will be based on the following:

  • How many consumers sign for one of the premium plans right away. According to the CEO, the "whales" are expected to make up 15-25 percent of the consumer base.
  • The conversion rate from free to premium. Low single digits is the norm - will FreedomPop follow the same trend or will it prove to be more like Evernote in which people who have used the service longer tend to convert better?
  • On a customer satisfaction note, will people get enough coverage via the Clearwire network and how quickly can FreedomPop get to its LTE solution to make for a more compelling 4G experience?
  • The support costs of managing the "free" customers.

The freemium business model continues to evoke passion and many misconceptions. To help you better understand its various nuances, we encourage you to listen to this on-demand webinar that discusses the freemium business model and also read our Best Practice Guide on business models.

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