With the ambitions of Google, Skype/Microsoft and Apple - combined with the latest HTML5 standardizations – there are strong forces pushing for voice and video to be free. Really, it is no longer a question if voice will be free but "to what extent will it be free."
This poses a host of challenges for operators, of course. But the same is true for over-the-top (OTT) voice providers themselves. If they are going to make it on their own, how do they survive? Specifically, how do they make money? Prepaid plans? Postpaid plans?
The answer seems to be freemium. This means that the basic service is provided free, while charging a premium for advanced features or better functionality. Freemium has been one of the models of choice in the gaming world and among app developers for a good while now, to the point where some are talking about moving beyond freemium.
Now it is the most common revenue model within the OTT world – including fring, Raketu, voxox, telfree and MO-Call, among others.
Why freemium? It allows a company to educate consumers and drive them to the paid services, all while they build trust in the service with the free services.
Yet there are drawbacks. One is that paid users subsidize the free users to some degree, which can lead to bad feelings. But the biggest problem? A very low conversion rate from free to paid.
A good example of this is Spotify, the streaming music service based on a freemium model (and with a strategy based largely on mobile). Even as it expands into the US and adds subscribers, it is losing lots of money – USD 41.5 million in 2010, a significant jump from 2009.
But at Billboard, they say that Spotify – and its freemium model – just need time:
But it's too early for rights holders to be frustrated by the inequality of Spotify's revenue … This process will take time. Spotify and other freemium, on-demand services are young companies that are still figuring out the marketplace.
But how much time? Do OTT voice companies have the time – and money – to let the freemium model develop?
And if not, what other options do they have?