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The optimal model for monetizing a web service:what is it?

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The optimal model for monetizing a web service:what is it?
On the way to developing an English language learning startup LinguaLeo.ru which we told you about in our blog , we faced a familiar problem for all startups: what should be the design of the business model and what should be the monetization of the web service.
So, the case study. You need to find the optimal monetization model on the example of a freemium resource.
For those who don’t read description :
LinguaLeo.ru is a web service for learning English online. The user specifies the current and desired levels of English, then, according to the proposed methodology, learns new words and pages from the content of interest in one of three formats: video with text, audio with text, texts. The content is added by users to the "Jungle" section with the indication of genres and topics. After linguistic processing, the service allows you to select content by complexity, volume, format, genre, topics, rating, and date of addition. The user selects the material of interest and begins to learn it. When clicking on unfamiliar words, they are added to the personal dictionary along with the context of usage. After working through a page, it can be marked as mastered, all familiar words will be added to the user’s personal vocabulary as "found" to calculate the current vocabulary.
The optimal model for monetizing a web service:what is it?
For new words added to your personal vocabulary, you can take one of three levels of training that involve the word itself, context, pronunciation, and spelling.
The personal dictionary provides additional information about each word: transcription, pronunciation, morphologically related words, grammatical information about the word, usage contexts encountered, and frequency. All words have a mastering status that changes automatically (after training) or manually.
In the progress log, the user observes the dynamics of progress in language learning: the number of words at each status, vocabulary, the number of pages mastered, the forecast of time to reach the target level, by day and total. A progress graph is shown.
The optimal model for monetizing a web service:what is it?
As a motivator and recommender, the user gets a pet – Leo the tamagotchi. Every day he wants to eat (learn new words and pages) and train (go through word training). The user puts Leo’s daily ration in dependence on the service’s training intensity plan.

Monetization. Why we chose Freemium

Global view (C2B, B2B or B2C). We’ve given up advertising (including partnering) models (it’s not good to distract with advertising when it comes to teaching). Commissions are out of place (if we introduced instructors for online classes, it’s another matter). Burning investments in the hope of the odds (C2B) is not the best style. The best foreseeable alternative is to monetize with the Freemium model for users (B2C, Free+Premium).

Current game rules for our Freemium model

What is the Freemium model in our case? By now there are two solutions. One of them was implemented on April 1st: when activating an account, the user receives bonus "meatballs" after registration. The meatballs "extend Leo’s memory" and allow him to memorize more words per day. If there are no meatballs, the user cannot translate and add more than 20 words a day to their personal vocabulary and training. If there are meatballs, the user can add an unlimited number of words. Meatballs are "eaten" by Leo’s pet each day, one at a time. When the bonus meatballs run out, the user’s choice is to limit himself to 20 new words per day, buy them, or "earn" the meatballs. You can earn meatballs for each friend you invite (five each) or by adding new content (one each, but this has not yet been implemented). You can buy one meatball for 30 rubles, or a set of 7, 31, 95, 186 or 365 meatballs. Wholesale is more profitable (up to 11 rubles. per piece). Payment through the service Robokassa. This option showed some disadvantages: inconvenient that the meatballs burn even when the user did not go to the service, and buy one at a time – not profitable! The optimal cost per meatball is not obvious. Perhaps a premium account (with meatballs) would be nice to add additional features.

Future game rules for our Freemium model

The project team is considering alternative "rules of the game". There were proposals to limit the total number of words added to the personal dictionary (up to 500, for example). Slipped the idea that you can "sell" new words over the free limit for the day for forty kopecks from your personal account at the service. An option has been proposed to simply set up two or three types of accounts with payment for an "improved" account for a certain period of time. There are ideas that some other features of the service should be available only in the premium version. All of these options have their advantages and disadvantages.
The project team has planned the following game rule changes (unless better ideas are introduced):

  • There are three "learning rates" of words per day : up to 20 words, 20 to 40 words, 40 to infinity.
  • When you reach the limit, you can manually or automatically switch the rate of learning (the rate of learning can be called "Leo memory" and its change can be called "Leo memory expansion"). Switching for a day from first to second and from second to third speeds is given for 1 meatball. The switch is only valid for 24 hours, always. When switching, you can set the flag "switch automatically when the limit is reached".
  • Meatballs are sold as internal currency, there are volume discounts. Meatballs don’t burn themselves. They are "eaten" by Leo only when memory expansion (speed switching) is necessary.
  • Sometimes the Spirit of Junlei triggers a "Frickadele Rain" (accruing bonus frickadeles, 3-5 at a time). The Frickadele Rain comes about once a month and on holidays, as well as for achievements.

Problem

David Heinemann-Hannson (creator of Ruby-on-Rails and several successful IT projects) says in a presentation at Startup School 08 that "the easiest way to monetize a useful IT resource for people is to put a price on it" (as opposed to exotic monetization models). In his presentation, he also gives examples of how this can be done (per one-time action, by subscription, based on volume, and other options). In our case study, we just need to get the pricing right.

Case decision criteria

First, the solution must be real and practical.
Second, the user must be happy with the rules of the game, everything must be clear, convenient and pleasant for him.
Thirdly, the solution should provide a stable monetization, development and growth of the project.

Question for a clue

What should be the "rules of the game" with meatballs on the service LinguaLeo.ru to meet all three criteria, "do no harm" and ensure the project a steady progress and development? I am interested in the opinion of those who have faced similar problems, the opinion of active users of LinguaLeo.ru and other web services monetized on the Freemium model.

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