Freemium is a pricing model with a free version that stays free forever and a paid version with more features, more capacity or fewer limits. The free tier serves as marketing and as the product demo. Revenue comes from the small share of users who upgrade, so the free tier must be cheap to serve.
Spotify is the widely known case: you can listen for free with advertising, or pay a monthly fee to remove the advertising and download tracks. The free version is not a gift, it is how paying customers are found.
Do the arithmetic before you choose this model. Assume 100,000 registered users and that 3 out of 100 upgrade. That gives 3,000 paying customers. At 10 euros a month they produce 30,000 euros of monthly revenue. The remaining 97,000 free users still cost money: servers, storage, support, licences. At 10 cents per free user per month that is 9,700 euros, and 20,300 euros remain. At 30 cents the same free base costs 29,100 euros and almost nothing is left. Freemium works when one more free user costs close to nothing.
The second decisive number is reach. If only 3 percent pay, you need a very large user base. Freemium fits products with broad appeal and cheap distribution, not niche tools with 500 possible customers.
Design the limit carefully. Restrict something that grows as the customer gets more value (storage, number of projects, team members, monthly volume) rather than making the free version deliberately poor. A frustrating free version produces uninstalls, not upgrades.
Two frequent mistakes: giving away so much that nobody has a reason to pay, and confusing freemium with a free trial. A trial ends after 14 or 30 days; freemium does not end, which means you carry the cost of non-paying users indefinitely.
Freemium is one of 43 business model patterns checked against an idea, so it often appears in a generated plan as a suggested revenue option.
