Q&A: LogMeIn's 'Free' Strategy Pays Off

The best things in life are free, so the song goes. LogMeIn Inc. may be proving that the best things for business life are free versions of your products. The Woburn, Mass.-based company has made a substantial living over the past three years by first launching free versions of its Web-based remote-management applications for desktop remote control, data backup, file sharing and remote system administration.

LogMeIn typically follows up with versions of all these products that are more heavily features laden and that people pay for. Since the first free release of its flagship LogMeIn product in April 2004, the company has grown its user base to just under 25 million.

Sean Ellis, LogMeIn's vice president of marketing, sat down with Redmond Editor Ed Scannell to discuss the company's plans to enter the Macintosh market, the reasons it fights off temptations to go after the big bucks in larger IT shops, and selling to a younger breed of IT users in the Web 2.0 age.

Redmond: You've been successful by offering the free versions of your products first. I assume you'll continue this strategy with your upcoming Mac products?

Ellis: Yes, particularly on the Mac. This is the way to get a ton of people to beat up on a product like this so we can get it just right. And the preview so far has been very popular. We had 1,000 downloads in the first 24 hours. We should have the GA code out in four to six weeks [by the end of August].


Why are you choosing to go after the Mac now, after being focused primarily on Windows for so long?

If you're the IT guy and you need a comprehensive solution for supporting your environment, you need to support everything. At trade shows, it's the No. 1 thing people come up and ask us: "Do you have a Mac version?" In some companies there may only be two or three Mac clients, but they need to support them just like Windows machines.

Have you had a shift either toward SMBs or larger accounts over the past year?

No, we've pretty much mapped to what the market looks like. Our market is dominated by these very small IT consultants. By focusing on the smaller IT consultants for the last year, we've seen a ton of market breadth. But there's a lot of horizontal opportunity, too.

How do smaller companies find you?

Through our free products -- initially we got our traction through Google and word of mouth. Our strategy with Google was: "If someone's looking for this type of solution, what's the most efficient way to get it to them?" So when we promoted the free product, we got 10 times the response rate.

What percentage of people move from the free versions to the paid versions of your products?

We don't release numbers on that, but it's a fast move. It's sort of the secret sauce of the business. I can tell you that it's less than 10 percent, but it doesn't need to be a very big number in order for it to be an awesome business.

What's the size of your user base?

We're close to 25 million. That's the number of people actually on computers.

With Web 2.0 technologies taking hold in IT shops, are you running into a younger breed of IT executives making purchasing decisions?

What we're seeing is this incredible groundswell of people doing IT stuff part time, or maybe they've left their IT jobs and are doing it full time as part of their own business. If you were a dentist and you had the IT guy who came in and fixed your systems once a month, there was a cost for that. With products like ours now, you don't have those costs. So you're enabling more software and more complex IT by smaller and smaller companies because it can be supported remotely and for a lot cheaper.

You've been focused on smaller IT shops. Do you plan to go after larger IT shops for remote management?

We get pressure all the time as a software company to chase the big money in enterprises. You have half the U.S. economy living in these small companies, the majority of which haven't been targeted by a lot of IT vendors. Now with Web 2.0, a lot of open source and some enterprise-level capabilities now viable among small businesses, it's the successful companies that are finding ways to bring this level of IT to SMBs.

About the Author

Ed Scannell is the editor of Redmond magazine.


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