Compare Pandora’s original business model with its current business model

Compare Pandora’s original business model with its current business model.
What’s the difference between “free” and “freemium” revenue models?

 

In the beginning Pandora tried to get music subscriptions by giving people 10 free hours, then requesting them to pay $36 a month after that for the service. Of sure no-one was ready to pay so much for a service that they could get for free by transferring on an FM radio.

After that model failed, they experimented with a variety of other options before settling on the "freemium" model they use today. A freemium service makes the basic service available to everyone for free, but with strict bandwidth restrictions and ads in between songs, resulting in a lower-quality listening experience.

What is the customer value proposition that Pandora offers?

 

Pandora gives its customers access to music through the “Music Genome Project,” which was founded by Pandora's founders and provides a way to classify music so that similar songs by different artists are grouped together into what they call a personalized radio station.

Professional musicians analyze the music for genre, and then the music professional sets 200-500 different data points for each song in each genre. A function is used to determine the distance between songs in order to include similar songs in a customer's playlist. Additional weights can be applied to promote or demote certain bands, causing them to play more or less frequently on the show.

This is truly remarkable technology that would be nearly impossible for another company to duplicate.

Why did MailChimp ultimately succeed with a freemium model but Baremetrics
did not?

According to the case study, freemium works best when your service has a large audience and you can offer paid upgrades to make it profitable for consumers to earn for the added value.

Because anyone who sends the same email to multiple people is a potential client, MailChimp works as a free service. A light user might be someone who sends out a weekly church newsletter via email, with a volume of only a few dozens of emails.

A high-end user could be a company that uses the service to send hundreds of thousands of emails to its customers and needs to track the conversion rate of those emails, such as how many people clicked on a link in the email and how many of those people actually purchased something as a result of the email.

Because not everyone needs to start their own targeted social networking site, Ning didn't work as a freemium service. If you require such services, you are willing to pay for them up front in order to obtain the features you require to expand your website.

What’s the most important consideration when considering a freemium revenue model?

Large potential Targeted audience:

This is the most crucial point. You need to attract a large number of people, millions of people, to your service in ability to boost as a business. These are the people you'll be converting to potential subscribers from the pool of free users.

Good User Experience / Easy to use Platform:

Let's say you have millions of visitors to your website; in order for them to use your service, it must be simple to use. You can't afford to have every new customer contact customer service before using your service. For each new user, the service must work "out of the box" and guide them through each step automatically.

 

High Acquisition Rate / High customer retention rates:

It won't help you if a million people try your free service and then never come back to your website. You want to make your site "sticky," so that when someone visits it, it is so simple to use and provides so much convenience that users return, continue to use the service, and passionately tell all their friends about it.

User Experience by providing value to the user and evolve:

Once people are on your site and using your platform, you want the value of what you're doing for them to grow over time, so that the longer they stay on your site, the more hard it is for them to leave and the more likely they are to use ones site as their primary Internet portal. As it will decrease the bounce rate and increase in ranking of website.