Why the Freemium Model Fails and What Ed Tech Startups Can Do About It
John Spencer
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Thanks John for writing this.

“Unfortunately, there is no such thing as “free tech for teachers.” Never. Someone is paying for development, either through sweat equity or paying developers. Someone is paying for server space. Sometimes this happens through advertising (or worse, selling data).”

I was a “techie” teacher for a number of years. I insisted that everything be free, free, free. I refused to spend any money on the technology I advocated for. I complained if an amazing tool cost a few dollars regardless of the difference it made in my classroom.

Last year, I cofounded CrowdSchool to help create, organize, and use project based learning in my classroom. WHAT A WAKE UP CALL!

Almost a year after founding CrowdSchool, my perspective has changed. It’s not just because I want to make money from my idea. It’s because I have a much better understanding of the technology and education technology industry. Free does not work because it is not sustainable. Unless purely non-profit, every company needs to pay the bills.

Worse yet, I have come to be cynical of completely free tools. Let me tell you why. Some of the biggest companies in ed tech are free to teachers and students. They remain free because they want to build up a very, very, very large pool of users. The growth of users is the highest aim of the company. To acquire users, many of these companies take on LARGE amounts of investment and capital. This investment and capital allows companies to grow bigger and bigger and keep the product absolutely free. This all sounds good, but…

People who invest like to get their money back. They also like to get much, much more than their money back.

So what will these companies with free products do?

This is where the water becomes murky. The companies can hope to be acquired by a bigger company, can look to charge for the product, or can look to monetize their user base in another way.

If you really think about this, the problems start to surface. How are they going to make money? How are they going to return the investment? What happens to users after an acquisition?

A series of drastic measures to return investment is not a particularly great prospect, especially when you think of all the users on the books.

I am not saying there is anything wrong with seeking investment (we will with CrowdSchool) or with acquiring a lot of users. If an edtech product is really doing good work, then growing with investment is a good thing.

What I am saying is that I like to see edtech companies with a clear path to revenue (i.e. charging even a small amount). Given my understanding of the industry I now like to see good products charge a bit of money. If something is working for me in the classroom, I will gladly give a few buck. Yes, it may not be free, but at least it may be sustainable. At least, I have a decent understanding of what the company plans to do, and survive, long term.

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