Just 3 more days until the special upgrade to lifetime offer expires!! Go upgrade today!

Over the last year I’ve learned a lot about offering free services online – I’ll share it with you today because (a) it’s interesting, and (b) some of you wonder how I make money :)!

About 90% of JibberJobber’s functionality is free. Why so generous? Because many of the people that urgently need JibberJobber don’t have any money (they are looking for a job). As I talk with most career centers and other non-profilt entities they have a very hard time understanding this.

(if you get so much for free, why in the world should you upgrade? The other 10% is big-time frosting on the cake. You get unlimited records, e-mail reminders on action items, and goodies like unlimited network relationship goals – very cool indeed! Did I mention there are only three days left before the price goes from $99 to $495 for lifetime?)

They are used to companies selling them stuff, which they can then offer to their constituents for free. For example, University of Whatever is willing to pay $5,000 a year to license a technology as long as they can offer it to their students and alumni for free.

But usually they DO NOT want to endorse, promote, or offer anything that their constituents might have to buy. From my perspective as a student (or alumnus) this is a little silly because they actually do recommend things that cost money – so its a selective thing.

And why they stongly recommend using Monster (where there is an option to upgrade) or LinkedIn (where there is an option to upgrade) baffles me – because JibberJobber has the same business model (freemium), but they tell me they can’t let their constituents know about JibberJobber.

I have to mention that there are some incredibly progressive schools that I’ve worked with – so this is more of a generalization – the point I’m making is that some people/companies don’t understand freemium.

So, back to Freemium. Josh Kopelman (Redeye VC) sums it up with his blog post titled The Penny Gap. You have to understand that Josh is a VC, so he’s critically looking at this model from an investor’s perspective (I realize that you, as my user, are also an investor!). His point is there is a HUUUUUUGE gap between FREE and pay me anything – even a penny. There are two nice charts he has, and intellectual talk over on his blog – go read that for indepth analysis (make sure to read the comments).

Josh points to a GigaOM blog post by Anne Zelenka titled Free: A Tactic, Not A Business Model. Anne goes on to talk about the idea a little more, ending with the idea that not understanding the real business model “misleads web application developers into thinking they don’t need to do the hard work of figuring out what’s really of value to users before they build and launch their online service. Who loses? Users, … “ She makes some excellent points, and there are great comments there as well.

So what in the world am I thinking? What is the business model behind JibberJobber? Has the penny gap been that big? And all of this boils down to, where is JibberJobber headed? Two thoughts:

• The percentage of people that have upgraded to JibberJobber is significantly higher than what I was told to expect (and this doesn’t even include this week’s special) – so the penny gap has been smaller than what others said it would be. Based on percentages alone, the revenue from upgrades will be enough to sustain the company moving forward once we hit a certain number of signups.
• The JibberJobber business plan has other revenue streams, aside from the premium upgrades. It’s a little too early to talk about it on this blog but these other streams have already been significantly larger than premium upgrades. This means that we can continue to offer a ton of features in JibberJobber for the free model (but still adding above-and-beyond value to the premium users).

All of this generalization can mean very little without real numbers to back them up. I’m not going to be that transparent right now. But I am very aware of the need to have a sustainable business model. We have whittled away some distractions (the GoogleAds went away pretty quickly) and are focusing on long-term sustainability through … our… secret sauce. More on that later :).

Anne Zelenka: “The penny gap separates the winners from the losers, economically speaking.”

Fred Wilson: “free is a great way to make money. You just have to know how you are going to get paid for being free.”

Hat tip to Jeff Jordan for pointing me to the penny gap posts.