The three community business models: free vs. paid vs. freemium

Results from a recent Workweek survey show that almost 30% of people trust what they learn from communities and forums more than they trust third parties, ChatGPT, influencers, or even B2B brands themselves. 

Where there is trust, there is value — and value creation is ultimately what allows sustainable businesses to be created. But does that mean that all successful communities should be monetized in some way? Not necessarily.

So how do you find out if your community should be free, paid, or freemium? Let’s walk through these three community business models, so you can decide which is the best fit for what you’re building.

Path #1: The free model 😎

The free model is perfect for leaders who want to give members a frictionless way to say “yes” to their community. Think zero hoops to jump through and zero credit card numbers to enter. Most free communities are either: affiliated with a product or service that already comes with a cost, associated with a non-profit, or a starting point for a new community.

A free community optimizes for getting as many members through the door as possible. If you're looking to get feedback on your product or service, or unite people around a topic that's important to you, a free community may be the right answer.

The benefits 🌞

  • Brand awareness: A free community helps to build brand awareness and to get feedback from more people
  • Faster growth: With less friction in the joining process, you'll attract more members more quickly
  • Faster iteration: Since members aren’t paying, they will have fewer expectations about the value they receive (though you should still be clear about what the value you’re providing is!) - that can create room for more experimentation

The risks ☔

  • Low commitment: Free communities need to think about how to recreate the commitment level that paid communities achieve by asking members to part with some of their hard earned money

A free community to watch 🌟

Sephora’s Beauty Insider community has more than six million total members, with more than 75,000 members actively online as we’re typing these words. It makes sense; just type “makeup trends” into your search bar, and you’ll get more than 400 million results.

This free community markets itself toward both “the beauty obsessed and beauty newbies.” Insiders can share makeup tips, send photos of finished looks, and talk about their favorite products, all in one forum-based space. For members who want to go deeper, specific groups were built for topics like clean beauty and lipstick trends. 

Sephora’s brand love is strong — they don’t need to build a paid community for the beauty-obsessed to buy their products. By giving their community members free perks, Sephora nurtures brand love without having to worry about competition.

Path #2: The paid model 💰

If you don’t have a separate product that you monetize, a paid model might be the answer. Paid communities often blossom around a creator, influencer, or brand that already has an established following. But that doesn’t mean you have to already have a following to start a community - many brands and creators now begin community-first.

Paid communities are perfect for those who want to control the alchemy in the room. Many require applications to join, so members can be vetted for their suitability. This tactic offers a useful barrier to entry for communities that want to provide a curated experience of like-minded individuals. 

Meagan Loyst, the founder and CEO of Gen Z VCs, spotlights a handful of paid communities doing it right. 

When it comes to paid communities, hype alone isn’t enough to convert curious prospects into loyal members. Members need to understand your value proposition up front, so they can make an informed purchase decision.

The benefits 🌞

  • Commitment: Paid communities inherently have a level of commitment that can mean members are more engaged than they might be otherwise
  • Revenue: If someone is willing to pay you for your hard work, that's a strong signal that you're creating value (and yes it is hard work!)

The risks ☔

  • Fewer members: By definition, some voices and perspectives will be excluded from a paid community because they can’t or won’t pay
  • More risk, slower growth: With more reward comes more risk - the expectation of value will be high, and members will churn out if they're not getting it
  • Kicking people out: When a member stops paying for your community, they’ll need to go

A paid community to watch 🌟

In just 24 hours, Sam Parr’s elite membership community for business leaders, Hampton, attracted 3,000 applications. Hampton is on a mission to connect entrepreneurs, high-growth founders, and CEOs in a private space. Members are required to have raised at least $3 million or have at least $1 million in revenue — and yet, most of the members fall in the $5 million to $50 million category.

“Everyone goes through an application process. In the interview, we’re looking to see, are they the type of person who we believe is really going to live and breathe Hampton?” says Jessica  Lowenstein, Hampton’s Head of Community & Events.

With a current waitlist of 2,000, Hampton made its case for going paid by solving for a need in the space.  Folks are happy to pay for Hampton’s premier level of offerings, events (think dining experiences and adventures), and networking conversations. Members even sign a confidentiality pledge, keeping the space honest and safe.

Option #3: The freemium model 🎂

There’s a way to have your community cake and eat it too. Enter the freemium model.

Rosie Sherry defines the freemium model as an approach “where some community, product, or service offerings are made freely available.” Note the keyword here — some.

A freemium community is for the builder who wants the best of both worlds. You can lower the friction of joining your community to attract more members, while those who want to dive deeper can pay for premium offerings.

Instead of a monthly fee, Rosie prefers a lifetime membership. This gives community members a strong incentive to come back and takes away the pressure of having to consistently “prove” the community’s value.

“In viewing a freemium community, you could say, ‘Our email list is a free part.’ And then I’m going to let anyone into our community tool, Superwave, but they only get access to one channel and a list of events. Then you can start to build paid parts on top,” says Rosie. “It’s all about finding strategies to pull people in and give them a taste of the premium community.”

The benefits 🌞

  • Inclusivity: Community is all about bringing interesting people with interesting perspectives to the table, and a freemium strategy allows you to bring all the relevant people in while still creating monetization opportunities
  • Communities within a community: Different levels of membership mean you inherently build sub-communities, which can keep conversations more focused
  • No kicking people out: A member churned out of your paid community? Fine! There’s no need to remove them altogether, they can stay in the free community

The risks ☔

  • Fragmentation of energy: When everyone is in the same space, the energy of any interaction is available to everyone; as communties become more exclusive, this changes
  • Finding the right balance: Putting too much value in the free part of your community means you'll struggle with upgrades, while a lack of value in the free part of the community will mean fewer new joiners

A freemium community to watch 🌟

Rosieland is a community for builders just like you. Rosieland offers top-tier resources, conversations, events and education for veteran and aspiring community builders alike.

Through Rosieland’s freemium model, Rosie makes sure there’s something for everyone. The weekly newsletter and blog posts are all free. A membership fee covers other offerings like guides, a social network, and events. Rosieland also doesn’t moderate any conversations because there’s less to moderate with a freemium model. This saves both money and time.

The Rosieland weekly newsletter is the main touchpoint for free and paid members. It keeps the community top of mind, creates a natural brand flywheel, and provides consistent value to all. 

Make your community your own, and don’t look back ⛰️

Here’s the best advice we can give you — whether you choose free, paid, or freemium, as long as the decision is rooted in genuine understanding of your members and how you'll create value for them, you'll be ok.

And if you'd like to explore using Superwave for your free, paid or freemium community, we'd be delighted to help.