So long freebies? SugarSync switches to paid-only model

An enduring mystery of the booming cloud file management and storage world is exactly how many of the zillions of users claimed — by Box, by Dropbox, by insert-your-favorite-vendor here — actually pay for the services. All of those vendors offer free versions: The typical model is you get X amount of storage for free, then the meter starts running. Or you get base service for free but have to pay for advanced perks.

Free lunchSugarSync is putting a stake in the ground:  it’s ending its freemium version, so customers will have to pay after a 90-day or 30-day trial. Why? “The move will allow the company to further refine the service to better meet the evolving needs of its consumer and business subscribers,” according to the company’s press release.

“Free stuff” has been the go-to customer acquisition strategy for companies ranging from consumer-focused Dropbox to business-oriented Box. Egnyte relied heavily on free trial periods — not freemium per se — but then started offering free accounts to woo Box customers. Accellion, as far as I can tell, is an outlier, offering free trials but no freemium. But that is an exception to the rule — until now.

Freemium is a great way to get potential customers in the door, but it’s very hard to make them pay the rent. Conversion rates are well below 10 percent ) (I would guess 3 to 4 percent is more like it but would welcome input in comments below.)

As might be expected, SugarSync CEO Mike Grossman said that offering free storage indefinitely is “not a very sustainable model.” If you’re offering a real service, then it is worth something, he noted.

In SugarSync’s case much of that value lies in the ability of the customer — typically a “prosumer” or a small business — to use the folder structure of his or her choice and have that same folder structure available in the cloud, desktop and mobile device, with all folders updated continuously.

There is a subset of those customers who care very much about how their data is managed and stored across devices, and he is banking that there are enough of them there for SugarSync to flourish. SugarSync pricing starts at $7.49 per month (or $74.99 per year) for 60GB.

It will be extremely interesting to see if SugarSync’s move sparks other competitors to follow suit. In eras past, most rational beings realized that when it came to goods and services you got what you paid for. The problem now is that so many people have grown up with free accounts for their photos and documents, they see that as their birthright.

Good luck persuading them otherwise.

 Photo courtesy of  Flickr user KAZVorpal