Pay-as-You-Go. In the pay-as-you-go business model, the user pays for only the services
he or she consumes. The pay-as-you-go model is most widely used by utilities providing
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power and water and cell phone service plans, but is gaining momentum in other areas such
as rental cars (i.e., Zipcar) and cloud computing. News providers such as The New York
Times and The Wall Street Journal have created “pay walls” as a pay-as-you-go option.
■ Freemium. The freemium ( 5 free 1 premium) business model is a model in which the
basic features of a product or service are provided free of charge, but the user must pay
for premium services such as advanced features or add-ons. 44 For example, companies
provide a minimally supported version of their software as a trial (e.g., business application
or video game) to give users the chance to try the product. Users later have the
option of purchasing a supported version of software, which includes a full set of product
features and product support. The freemium business model is used extensively by
open-source software companies such as Red Hat, mobile app companies, and other
Internet businesses. Many of the free versions of applications include advertisements
to make up for the cost of supporting non-paying users. In addition, the paying premium
users subsidize the free users. The freemium model is often used to build a consumer
base when the marginal cost of adding another user is low or even zero (such as
in software sales). Some examples are Adobe Acrobat, Dropbox, Evernote, LinkedIn,
Microsoft Office 365, and Spotify.