The True Cost of Free Apps and SaaS Tools Freemium Vs. Free — There Is a Difference!

Everybody likes free stuff! Free lotion samples at the mall, a complimentary stay at a new timeshare, or the chance to win a free gift certificate to your favorite restaurant.

But in almost all cases of “free stuff,” there are strings attached. If you agree to that free lotion sample, the pushy salesperson might try guilting you into buying a full size product. To stay at that new timeshare, you have to sit through a long, boring, and possibly aggressive sales pitch. For a chance to win that gift card, you have to provide your contact information and probably be hounded by telemarketers for weeks straight.

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Nothing is ever really free: there is always more to the story. And that is just as true for “free” apps and SaaS (Software as a Service) tools.

Now keep in mind: there is a big difference between “free” and “freemium” products and tools. Freemium tools are often completely legitimate and helpful (like Skype, Hootsuite, and Lightroom CC), and the only “catch” is that you might not have access to all the features paid users have. But completely free tools on the other hand are quite a bit more risky.

Free Tools Aren’t Free

Imagine you own a restaurant, and none of your customers pay for the food they order. You’re going to go out of business really fast unless you find a different way to make money. Which is exactly what the developers of these free apps and tools have figured out.

At the end of the day, these tools are run by businesses, and businesses need to make a profit somehow. But many users rarely think about that — and they don’t see a need to switch to paid services, because they don’t realize that there are so many other ways to pay for a product or service than just by spending money. And the primary way you end up paying for free tools is by giving away your data.

Some apps make their money by having you watch advertisements every now and then, but most free apps work through processes known as data monetization: the process of collecting, segmenting, and selling user data off to data collectors. Using data monetization, app developers are able to profit off of 100% of their users — but because the data collection occurs smoothly in the background, most people never even know it’s happening.

The only way to really know if an app is selling your data is by the terms of use you often have to agree to prior to using the app. These terms of use are usually very long and hard to understand, but tucked in there somewhere there is probably a line that states you agree to have your information sold to marketers and researchers.

The better option to keep costs down and your data secure is to utilize freemium tools.

What is Freemium?

The typical freemium business model works by offering a limited, basic service for free, and then the option to access more advanced or additional features for an additional cost — a premium.

With a freemium model you might be able to download a slick photo editing app for free, and have access to a couple preset filters…but if you want access to more high-quality filters and overlays, you need to buy them. Or maybe you enjoy streaming music during your morning run, but in order to listen ad-free you need to purchase a subscription.

The freemium business model is an indicator that the developers have a clear strategy, and that they are using the free access as a loss leader — a pricing strategy where a product is sold below its market cost (or given away) to encourage sales of more profitable goods and/or services. By presenting this loss leader, app and SaaS tool businesses are able to engage with more customers and convince more of them to sign up for premium services. It basically gives companies the chance to win customers over, and prove to them that their full product is worth a small extra fee.

Freemium apps are becoming very popular, and highly trusted — we polled online users, and found that over 80% of users have 5 or more freemium games and apps like Canva, Slack, and Spotify on their primary personal devices. When asked if they feel freemium apps/SaaS tools are just as secure as their paid counterparts, 50% agreed — only 25% disagreed, and another 25% had no opinion. It’s great that people recognize the legitimacy of freemium tools (especially compared to the fully “free” alternatives), but there is still a concern:

When asked about cost versus security concerns, 80% said they cared more about the app cost, and only 20% said they cared about app security. A lot of freemium users trust those apps and tools blindly — they don’t stop to think that not all tools are created equal! Just because an app or tool has an option to pay, doesn’t make it safe and secure. Make sure you aren’t downloading freemium apps from unknown, unreliable developers. Only use apps and tools that you know you can trust.

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*** This is a Security Bloggers Network syndicated blog from Private Tunnel authored by Lydia Pert. Read the original post at: