Wednesday, October 9, 2013

Portrait of Jewish Americans

Portrait of Jewish Americans

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American Jews overwhelmingly say they are proud to be Jewish and have a strong sense of belonging to the Jewish people, according to a major new survey by the Pew Research Center. But the survey also suggests that Jewish identity is changing in America, where one-in-five Jews (22%) now describe themselves as having no religion.
jew-overview-1The percentage of U.S. adults who say they are Jewish when asked about their religion has declined by about half since the late 1950s and currently is a little less than 2%. Meanwhile, the number of Americans with direct Jewish ancestry or upbringing who consider themselves Jewish, yet describe themselves as atheist, agnostic or having no particular religion, appears to be rising and is now about 0.5% of the U.S. adult population.1
The changing nature of Jewish identity stands out sharply when the survey’s results are analyzed by generation. Fully 93% of Jews in the aging Greatest Generation identify as Jewish on the basis of religion (called “Jews by religion” in this report); just 7% describe themselves as having no religion (“Jews of no religion”). By contrast, among Jews in the youngest generation of U.S. adults – the Millennials – 68% identify as Jews by religion, while 32% describe themselves as having no religion and identify as Jewish on the basis of ancestry, ethnicity or culture.
jew-overview-2This shift in Jewish self-identification reflects broader changes in the U.S. public. Americans as a whole – not just Jews – increasingly eschew any religious affiliation. Indeed, the share of U.S. Jews who say they have no religion (22%) is similar to the share of religious “nones” in the general public (20%), and religious disaffiliation is as common among all U.S. adults ages 18-29 as among Jewish Millennials (32% of each).2
Secularism has a long tradition in Jewish life in America, and most U.S. Jews seem to recognize this: 62% say being Jewish is mainly a matter of ancestry and culture, while just 15% say it is mainly a matter of religion. Even among Jews by religion, more than half (55%) say being Jewish is mainly a matter of ancestry and culture, and two-thirds say it is not necessary to believe in God to be Jewish.
jew-overview-4Compared with Jews by religion, however, Jews of no religion (also commonly called secular or cultural Jews) are not only less religious but also much less connected to Jewish organizations and much less likely to be raising their children Jewish. More than 90% of Jews by religion who are currently raising minor children in their home say they are raising those children Jewish or partially Jewish. In stark contrast, the survey finds that two-thirds of Jews of no religion say they are not raising their children Jewish or partially Jewish – either by religion or aside from religion.
Intermarriage is a related phenomenon. It is much more common among secular Jews in the survey than among Jews by religion: 79% of married Jews of no religion have a spouse who is not Jewish, compared with 36% among Jews by religion. And intermarried Jews, like Jews of no religion, are much less likely to be raising their children in the Jewish faith. Nearly all Jews who have a Jewish spouse say they are raising their children as Jewish by religion (96%). Among Jews with a non-Jewish spouse, however, 20% say they are raising their children Jewish by religion, and 25% are raising their children partly Jewish by religion. Roughly one-third (37%) of intermarried Jews who are raising children say they are not raising those children Jewish at all.
jew-overview-5Moreover, intermarriage rates seem to have risen substantially over the last five decades. Among Jewish respondents who have gotten married since 2000, nearly six-in-ten have a non-Jewish spouse. Among those who got married in the 1980s, roughly four-in-ten have a non-Jewish spouse. And among Jews who got married before 1970, just 17% have a non-Jewish spouse.3
It is not clear whether being intermarried tends to make U.S. Jews less religious, or being less religious tends to make U.S. Jews more inclined to intermarry, or some of both. Whatever the causal connection, the survey finds a strong association between secular Jews and religious intermarriage. In some ways, the association seems to be circular or reinforcing, especially when child rearing is added into the picture. Married Jews of no religion are much more likely than married Jews by religion to have non-Jewish spouses. Jews who have non-Jewish spouses are much less likely than those married to fellow Jews to be raising children as Jewish by religion and much more likely to be raising children as partially Jewish, Jewish but not by religion, or not Jewish at all. Furthermore, Jews who are the offspring of intermarriages appear, themselves, to be more likely to intermarry than Jews with two Jewish parents.
jew-overview-6The survey also shows that Reform Judaism continues to be the largest Jewish denominational movement in the United States. One-third (35%) of all U.S. Jews identify with the Reform movement, while 18% identify with Conservative Judaism, 10% with Orthodox Judaism and 6% with a variety of smaller groups, such as the Reconstructionist and Jewish Renewal movements. About three-in-ten American Jews (including 19% of Jews by religion and two-thirds of Jews of no religion) say they do not identify with any particular Jewish denomination.
Though Orthodox Jews constitute the smallest of the three major denominational movements, they are much younger, on average, and tend to have much larger families than the overall Jewish population. This suggests that their share of the Jewish population will grow. In the past, high fertility in the U.S. Orthodox community has been at least partially offset by a low retention rate: Roughly half of the survey respondents who were raised as Orthodox Jews say they are no longer Orthodox. But the falloff from Orthodoxy appears to be declining and is significantly lower among 18-to-29-year-olds (17%) than among older people. (See discussion and table in Chapter 3, Jewish Identity.)
Within all three denominational movements, most of the switching is in the direction of less-traditional Judaism. The survey finds that approximately one-quarter of people who were raised Orthodox have since become Conservative or Reform Jews, while 30% of those raised Conservative have become Reform Jews, and 28% of those raised Reform have left the ranks of Jews by religion entirely. Much less switching is reported in the opposite direction. For example, just 7% of Jews raised in the Reform movement have become Conservative or Orthodox, and just 4% of those raised in Conservative Judaism have become Orthodox.
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These are among the key findings of the Pew Research Center’s survey of U.S. Jews, conducted on landlines and cellphones among 3,475 Jews across the country from Feb. 20-June 13, 2013, with a statistical margin of error for the full Jewish sample of plus or minus 3.0 percentage points.
The new survey also finds that seven-in-ten Jews (70%) say they participated in a Passover meal (Seder) in the past year, and 53% say they fasted for all or part of Yom Kippur in 2012. These measures of observance appear to have ticked downward slightly compared with a national telephone survey conducted more than a decade ago, the 2000-2001 National Jewish Population Survey.4 In that poll, 78% of Jews said they had participated in a Seder in the past year, and 60% said they had fasted on Yom Kippur. If there has been any decline on these measures, however, it appears to be attributable to the rising number of Jews of no religion; rates of Passover and Yom Kippur observance have remained stable among Jews by religion.
jew-overview-8Despite the changes in Jewish identity in America, 94% of U.S. Jews (including 97% of Jews by religion and 83% of Jews of no religion) say they are proud to be Jewish. Three-quarters of U.S. Jews (including 85% of Jews by religion and 42% of Jews of no religion) also say they have “a strong sense of belonging to the Jewish people.” And emotional attachment to Israel has not waned discernibly among American Jews in the past decade, though it is markedly stronger among Jews by religion (and older Jews in general) than among Jews of no religion (and younger Jews in general).5
Overall, about seven-in-ten Jews surveyed say they feel either very attached (30%) or somewhat attached (39%) to Israel, essentially unchanged since 2000-2001. In addition, 43% of Jews have been to Israel, including 23% who have visited more than once. And 40% of Jews say they believe the land that is now Israel was given by God to the Jewish people.
At the same time, many American Jews express reservations about Israel’s approach to the peace process. Just 38% say the Israeli government is making a sincere effort to establish peace with the Palestinians. (Fewer still – 12% – think Palestinian leaders are sincerely seeking peace with Israel.) And just 17% of American Jews think the continued building of settlements in the West Bank is helpful to Israel’s security; 44% say that settlement construction hurts Israel’s own security interests.
jew-overview-9A key aim of the Pew Research Center survey is to explore Jewish identity: What does being Jewish mean in America today? Large majorities of U.S. Jews say that remembering the Holocaust (73%) and leading an ethical life (69%) are essential to their sense of Jewishness. More than half (56%) say that working for justice and equality is essential to what being Jewish means to them. And about four-in-ten say that caring about Israel (43%) and having a good sense of humor (42%) are essential to their Jewish identity.
But observing religious law is not as central to most American Jews. Just 19% of the Jewish adults surveyed say observing Jewish law (halakha) is essential to what being Jewish means to them. And in a separate but related question, most Jews say a person can be Jewish even if that person works on the Sabbath or does not believe in God. Believing in Jesus, however, is enough to place one beyond the pale: 60% of U.S. Jews say a person cannot be Jewish if he or she believes Jesus was the messiah.
jew-overview-10By several conventional measures, Jews tend to be less religious than the U.S. public as a whole. Compared with the overall population, for example, Jews are less likely to say that they attend religious services weekly or that they believe in God with absolute certainty. And just 26% of U.S. Jews say religion is very important in their lives, compared with 56% of the general public. (Orthodox Jews are a clear exception in this regard, exhibiting levels of religious commitment that place them among the most religiously committed groups in the country.) But while relatively few Jews attach high importance to religion, far more (46%) say being Jewish is very important to them.
Other findings from the Pew Research Center survey include:
  • Jews from the former Soviet Union and their offspring account for roughly one-tenth of the U.S. Jewish population; 5% of Jewish adults say they were born in the former Soviet Union, and an additional 6% say they were born in the U.S. but have at least one parent who was born in the former Soviet Union.
  • Jews have high levels of educational attainment. Most Jews are college graduates (58%), including 28% who say they have earned a post-graduate degree. By comparison, 29% of U.S. adults say they graduated from college, including 10% who have a post-graduate degree.
  • Fully one-quarter of Jews (25%) say they have a household income exceeding $150,000, compared with 8% of adults in the public as a whole. At the same time, 20% of U.S. Jews report household incomes of less than $30,000 per year; about six-in-ten Jews in this low-income category are either under age 30 or 65 or older.
  • Roughly four-in-ten U.S. Jewish adults (39%) say they live in a household where at least one person is a member of a synagogue. This includes 31% of Jewish adults (39% of Jews by religion and 4% of Jews of no religion) who say they personally belong to a synagogue, temple or other congregation.
  • Jews think several other minority groups face more discrimination than they do. Roughly seven-in-ten Jews (72%) say gays and lesbians face a lot of discrimination in American society, and an equal number say there is lot of discrimination against Muslims. More than six-in-ten (64%) say blacks face a lot of discrimination. By comparison, 43% say Jews face a lot of discrimination. Overall, 15% of Jews say that in the past year they personally have been called offensive names or snubbed in a social setting because they are Jewish.
  • Half of Jews (52%), including 60% of Jews by religion and 24% of Jews of no religion, say they know the Hebrew alphabet. But far fewer (13% of Jews overall, including 16% of Jews by religion and 4% of Jews of no religion) say they understand most or all of the words when they read Hebrew.
  • Jews are heavily concentrated in certain geographic regions: 43% live in the Northeast, compared with 18% of the public as a whole. Roughly a quarter of Jews reside in the South (23%) and in the West (23%), while 11% live in the Midwest. Half of Jews (49%) reside in urban areas and a similar number (47%) reside in the suburbs; just 4% of Jews reside in rural areas.
  • As a whole, Jews support the Democratic Party over the Republican Party by more than three-to-one: 70% say they are Democrats or lean toward the Democratic Party, while 22% are Republicans or lean Republican. Among Orthodox Jews, however, the balance tilts in the other direction: 57% are Republican or lean Republican, and 36% are Democrats or lean Democratic.

About the Survey

jew-overview-11These are some of the findings of the new Pew Research Center survey, conducted Feb. 20-June 13, 2013, among a nationally representative sample of U.S. Jews. This is the most comprehensive national survey of the Jewish population since the 2000-2001 National Jewish Population Survey. More than 70,000 screening interviews were conducted to identify Jewish respondents in all 50 states and the District of Columbia. Longer interviews were completed with 3,475 Jews, including 2,786 Jews by religion and 689 Jews of no religion.
Interviews were conducted in English and Russian by random digit dialing on both landlines and cellphones. In order to reach Jewish respondents most efficiently, the survey focused on telephone exchanges for counties where previous surveys indicate that at least some Jews reside. Overall, the survey covered geographic areas that are home to more than 90% of U.S. adults. Counties were excluded from the survey only if (a) no Jews had been interviewed in those counties in more than 150 Pew Research Center surveys conducted over the past decade and (b) no other surveys in a Brandeis University database had ever interviewed a Jew in those counties and (c) no synagogues or institutions of Jewish education were known to be located in those counties at the time of the Pew Research survey.6 Based on this geographic coverage, more than 95% of the Jewish population, including 99% of the Jewish by religion population, is estimated to have been eligible to be called for the survey. A more detailed explanation of the survey’s methodology is provided in Appendix A (PDF).
In addition to interviewing Jews, the survey interviewed 1,190 people of Jewish background – U.S. adults who were raised Jewish or had at least one Jewish parent, but who now have a religion other than Judaism (most are Christian) or who say they do not consider themselves Jewish (either by religion or aside from religion). Finally, the survey also interviewed 467 people with a Jewish affinity – people who have a religion other than Judaism (or have no religion) and who were not raised Jewish and did not have a Jewish parent, but who nevertheless consider themselves Jewish or partially Jewish in some way.
This report focuses primarily on Jews by religion and Jews of no religion, which are combined into a “net” Jewish category. The size and characteristics of people of Jewish background and Jewish affinity are summarized in Chapter 1 (Population Estimates) andChapter 7 (People of Jewish Background and Jewish Affinity).

Rise of ‘Jews of no religion’ most significant find of Pew study, says directorLandmark new survey shows a whopping 22% of American Jews describe themselves as proudly Jewish by culture alone; 71% of non-Orthodox Jews marrying out

Rise of ‘Jews of no religion’ most significant find of Pew study, says directorLandmark new survey shows a whopping 22% of American Jews describe themselves as proudly Jewish by culture alone; 71% of non-Orthodox Jews marrying out
 The first comprehensive survey of American Jews in the 21st Century, which has been making waves this week, reveals some dramatic changes in Jewish identity. The most significant, according to one of the study’s lead authors, is that one-fifth of American Jews don’t even call themselves “Jewish” when asked about their religion.

“When we ask this group what their religion is, they tell us they’re atheists, agnostic or not particular to any religion,” says Greg Smith, Director of US Religion Surveys at the Pew Research Center. “But they do subsequently tell us they consider themselves Jewish or partially Jewish aside from religion. They say they were raised Jewish or had at least one Jewish parent.”
In the study, this group is called “Jews of no religion,” and their numbers are rising. Among US Jews who were born before 1927, the so-called Greatest Generation, only seven percent did not call themselves Jewish by religion. By contrast, among American Jewish Millennials, those born after 1980, 32% do not describe themselves as Jewish by religion. Rather, they identify as Jewish only on the basis of ancestry, ethnicity, or culture.

“That is a big and significant number,” says Smith. “The generational pattern suggests that it’s growing and that’s very important because the data show that Jews of no religion are much less connected to the Jewish community, are much less engaged and involved in Jewish organizations and are much less likely to be raising their children Jewish as compared to Jews who describe themselves as Jews by religion.”

Smith says the difference between these two poles of American Jewry “is like night and day.”

Less than half of US Jews who grew up Orthodox remained part of the community
According to the survey, Orthodox Jews, which comprise only 10% of US Jewry, are much more observant on a variety of measures such as synagogue attendance and participation in life-cycle rituals. But the study also discovered that less than half of US Jews who grew up Orthodox remained part of the community.

Among the three major denominations, Reform Jews have the highest retention rate at 55%. Forty-eight percent of those who grew up Orthodox remained in the Orthodox community, whereas only 36% of US Jews who were raised Conservative stayed within the movement.

The falloff from Orthodoxy, at least, appears to be declining and is significantly lower – only 17% – among 18 to 29 year olds. It’s an open question as to whether this is due to a change within the community or simply that not enough time has elapsed for these Jews to change their affiliation.

The most talked-about number in the new survey is sure to be the intermarriage rate, often considered the leading indicator of the health and long-term prospects of the American Jewish community.

The Pew survey found the overall intermarriage rate at 58%, with a whopping 71% among the non-Orthodox. According to Smith, there is good news and bad news in this.

“The good news — the data appears to show that the intermarriage rate is pretty flat, at least over the past couple of decades,” he says. “However, the bad news is that, compared to the past, it’s very high. Of those who were married before 1970, only 17% have a non-Jewish spouse.”

Rabbi Shmuel Herzfeld of Washington, DC’s Congregation Ohev Shalom/The National Synagogue, calls the data on intermarriage and secularization “sobering, but not unexpected.”

“Surveys like this can tell us a lot about the community level on a macro level, but we need to remind ourselves that they say very little on a micro level,” says Herzfeld, a modern orthodox rabbi. “Before we can expect communal redemption from the problems highlighted in this survey, we must hope for many individual redemptions, each in their own unique way.”

‘Surveys like this can tell us a lot about the community level on a macro level, but… very little on a micro level’
Herzfeld says “there is no quick fix” to the American Jewish community’s problems, but says the community “must redouble our efforts to connect with individual Jews and teach the Torah. We must redouble our efforts to encourage more Jews to become teachers of Torah.”

On the latter, Herzfeld is leading by example as his synagogue was one of the first in the nation to hire a female Orthodox clergy member, Maharat Ruth Balinsky Friedman.

Jack Wertheimer, a professor of American Jewish history at the Jewish Theological Seminary in New York, told the New York Times that the Pew study is “a very grim portrait of the health of the American Jewish population in terms of their Jewish identification.” And Phil Zuckerman, a professor of sociology and secular studies at Pitzer College, told the Los Angeles Times that, if secular Jews aren’t being wooed by Jewish institutions, “They may walk away… And what you’ll have left is the Orthodox.”

But Smith, who oversaw the Pew survey, cautions against “confusing religious observance or levels of observance with levels of strength of Jewish identity.”

“What comes through loud and clear in the data,” he says, “is that religion may not be that important in many Jews’ lives, but being Jewish is. They tell us they are proud of being Jewish, they feel a close connection to the Jewish people and a strong sense of identity.”

‘Religion may not be that important in many Jews’ lives, but being Jewish is’
“So those two things – secularization and a strong sense of Jewish identity – are not contradictory.” It’s not that American Jewish identity is necessarily waning, he says, but, rather, it’s changing.

One area where change is apparent is American Jewish attitudes to Israel. The Pew survey found that 7 in 10 US Jews say they feel attached to the Jewish state and 4 in 10 say they’ve been to Israel at least once. However, along with this sense of connection, there is also a new willingness to be critical of the Israeli government.

When asked whether they believe the current Israeli government is sincere in its efforts to make peace with the Palestinians, 38% said yes and 48% said no, a finding Smith called “striking.” To be sure, there was even more skepticism about Palestinian intentions as 75% of respondents don’t think the Palestinian leadership is making a sincere effort to achieve peace.

The full report has much more on Israel and contains a treasure trove of information on American Jewish attitudes. Among the more surprising findings:

More than one-third (34%) of American Jews say believing Jesus is the Messiah is compatible with Judaism.
Forty-two percent believe having a good sense of humor is part of what it means to be Jewish.
One-quarter (25%) of US Jews have a household income exceeding $150,000 (compared with eight percent of the public as a whole).
Seventy percent are Democrats compared with 22% who call themselves Republicans; however, among the Orthodox, 57% lean Republican and 36% lean Democrat.
Only 17% of US Jews believe the building of Jewish settlements enhances Israel’s security.
The survey, called A Portrait of Jewish Americans, has been in the works for years and cost several million dollars. Smith says the Pew Research team spoke with more than 70,000 people across the country in order to recruit a large enough sample of Jews. Interviews were conducted from February to June of this year in English and Russian, on land lines and via cell phones. The margin of error for the full sample is plus or minus three percentage points.

Why freemium models are ‘sexy’ but overrated

Why freemium models are ‘sexy’ but overrated
We hear the term “mobile first” bandied about by investors and entrepreneurs, but in reality, we’re still in the very early days of mobile commerce.
Indeed, entrepreneurs are still experimenting with distribution and revenue models, and they’re making plenty of mistakes are they learn.
Enterprise cool kids like Yammer and Asana offer their product for free — the “freemium model” — and then make a strong case to purchase an enterprise-wide subscription or move larger teams to paid versions of the product. Startups often believe they can follow this model and that their products will be a near-instant hit with large organizations if it’s well designed and easy to use.
[For more, read our feature on the "Dropbox effect" myth.]
Emergence Capital's Sean Jacobsohn
Emergence Capital’s Sean Jacobsohn.
Sean Jacobsohn, an investor at venture firm Emergence Capital, is concerned that this “sexy” freemium model has been overplayed by entrepreneurs, who aren’t considering their potential buyer. It works in certain cases, but not if the app is targeting a specific vertical or role within an organization.
Over the years, Jacobsohn has witnessed the models that work, and he has some advice to share to today’s entrepreneurs. He will be a judge at MobileBeat 2013′s Innovation Showdown, a competition for 10 mobile companies to pitch their ideas. This year’s focus will be on how your company embodies, enables, or amplifies a killer mobile experience.
Jacobsohn shares his views on the future of mobile business applications, monetization strategies that work, and the startups that are on his radar.
VentureBeat:  What are you looking for from MobileBeat 2013′s Innovation Showdown finalists? 
Sean Jacobsohn: Not only do the finalists need a sharp business description, but they also have to showcase a mobile product design that is instantly accesible. Companies shouldn’t design apps that require explanation or thinking. The winners will solve a problem in a way that seems so intuitive that an explanation will almost seem superfluous. Those who use apps like Evernote or Uber simply know what to do.
VentureBeat: What specific technology will draw your interest? 
Jacobsohn: I’m really looking for mobile-first approaches, meaning startups that solve a key pain point in a vertical industry or those who solve a problem for someone in a specific role, like sales or marketing. It could replace an existing technology and become the de facto standard or solve a problem that does not currently have a solution. More specifically, I’m on the hunt to fund mobile startups with a focus on several key verticals: health care, education, and real estate.
VentureBeat: One of the biggest challenges for entrepreneurs is distribution. What’s working?
Jacobsohn: Yes, people are still trying to figure out how to best get in touch with potential buyers. In some cases, entrepreneurs offer their apps for free or [give] free trials. App stores are most effective, but there is a ton of noise [on those] and plenty of consumer apps.
VentureBeat: I’ve heard Yammer’s model referred to as the “freemium trap.” Should entrepreneurs build a base of customers by offering the product for free? 
Jacobsohn: A lot of people think the freemium model is sexy, but successful freemium businesses get you 3 percent conversions. You need a demonimator in the millions to have a viable business. That works in certain cases, but not if you’re going after a smaller segment. I often suggest that entrepreneurs offer a free trial rather than giving the product away for free.
VentureBeat: Can you call bullshit on any common misconceptions you hear from entrepreneurs? 
Jacobsohn: Some entrepreneurs believe they can just build a great product and rely on a reseller to distribute it. They don’t think about what’s in it for the reseller. The other misconception we already touched on: the freemium model. In most cases, the entrepreneurs can’t make the business model work.
VentureBeat: Have entrepreneurs typically thought about security, and protecting corporate data? 
Jacobsohn: We’re seeing people bringing their own device and business app to the workplace [This trend is often referred to as “BYOD,” or bring your own device — Ed.), just like they do in their consumer life. To make that a corporate wide purchase, you will often need the chief information officer to bless it. I think that protecting corporate data will be on of he factors that influence the CIO’s decision. There are a lot of solutions out there, though. Mobile device management can alleviate this concern to some level, so IT can still focus on buying the best application for the ir business.
VentureBeat: Given that employees are bringing devices and apps to work, do mobile business entrepreneurs still need to hire a traditional sales force? 
Jacobsohn: Yes. Often, people are not using the product in the most optimal way when it’s free. People can get tired of the app pretty quickly if they are not using it in the correct way. You get the most value when you get the whole company using your product, and a traditional enterprise sales force can help you get there.

Read more at http://venturebeat.com/2013/07/02/why-freemium-models-are-sexy-but-overrated/#wB77vcf1Rjsm4MTr.99

The 'Freemium' Model: Top Flaws And Potent Fixes

The 'Freemium' Model: Top Flaws And Potent Fixes

The song says the love we take is equal to the love we make. Try telling that to all the entrepreneurs who give away their valuable work in the hope—often futile—of upselling a fraction of the freeloaders later on. 

That freemium model (a mix of “free” and “premium”) has been gathering steam since 1994 when Esther Dyson, a prominent technology analyst, envisioned a world where intellectual property would cost nearly nothing to distribute. Back then, most providers of “creative content” had to shell out substantial sums to reproduce and deliver each additional copy of their products. Indeed, the Internet has all but eliminated those so-called marginal costs—increasing overall supply of stuff like software, media and advice, and driving consumer prices to zero. Meanwhile, pesky fixed costs like equipment, buildings and people remain.
And so the debate rages on: How to attract customers with free content without going broke in the process?
Brian DeChesare, founder of Mergers & Inquisitions and Breaking Into Wall Street (Photo credit: Brian DeChesare)
I put that question to 29-year-old Brian DeChesare, former investment banker and founder of Mergers & Inquisitions and Breaking Into Wall Street, educational Web sites aimed at students and entry-level professionals eyeing careers in banking and money management. With no outside funding, DeChesare built a “profitable, seven-figure revenue business with 20,000 customers in less than four years”—all, he says, by offering scads of free content (including newsletters, expert interviews and case studies) along with paid, interactive video courses on everything from financial modeling to job interviewing.
Here, in his words, is how he did it, and the lessons gleaned along the way.
[Warning: You don’t have to know a thing about finance to learn a lot from this post.]
It sounds appealing: Offer content or a stripped-down version of your service for free, avoid paying for expensive sales reps or traditional advertising, and instantly win tens of thousands of customers. The only problem is “freemium” doesn’t work like that. And if you approach it with a Field of Dreams mindset, you’re setting yourself up for failure.
Most online discussions of this topic are limited to theories or speculation; they’re short on what has worked in real life for ordinary businesses. So I’m going to share what has worked well—and not so well—for our team.
Avoiding the four mistakes outlined below won’t guarantee your success, but it will reduce your chances of failure and set you on the right path, whether you’re starting a new business or you want to move an existing one in this direction.

Mistake #1: Picking The Wrong Market
“Markets that don’t exist don’t care how smart you are.” -- Marc Andreessen
Almost all entrepreneurs and business leaders will tell you to focus on “the right market,” but they stop before defining precisely what that is. My definition is simple and comes in two parts:
1. The market must already have a set of customers who are paying moneyfor a solution to a problem.
2. There must be a gap in this market, such as: a) a customer segment that is underserved by existing providers; b) a product or service not delivered in an ideal way; or c) an entirely overlooked distribution channel.
In my business—which serves students, career changers, and finance professionals—the “willingness to pay” and “market gap” criteria were both satisfied.
First, many firms and some individuals were paying thousands of dollars for in-person training classes on accounting, valuation, and financial modeling. Second, there were three distinct gaps: 1) Existing providers focused on large firms and overlooked smaller businesses and individual students/professionals; 2) in-person classroom training was sub-optimal (you spend far too much time making sure everyone in the room is looking at cell number F273 in Excel); and 3) when we started, few were paying attention to the online channel.
Most freemium businesses fail because Part 1 of the “right market” definition isn’t satisfied—that is, founders pick a hobbyist or “passion” niche where it’s much more difficult to charge money no matter how great your free version is. It’s much easier to stack the odds in your favor if: 1) you help people and companies make money, or 2) you’re in a market where spending habits are already proven, even if the relationship between price and value isn’t hard and fast (as with health sites and fitness, or dating sites and relationships).

Mistake #2: Offering No Compelling Reason to Upgrade to Your Paid Product or Service
Most freemium business models fail because companies offer either too littleor too much value with their free product or service. The trick to this balancing act is ensuring that 1) anyone can get some value without having to pay, and 2) those who upgrade to the paid version receive exceptional service.
However, promising “service” and “support” likely won’t be enough to distinguish a free product from the paid version. Yes, if you’re selling enterprise software to large companies, your customers will pay for service and support—but small companies and individual consumers tend to care less about support and more about what they get for each dollar spent.
Better move: Use support as a marketing tool instead. Give users a great experience that surpasses their expectations, and let them spread the good word. For software and web applications, the approach is well-established (if not perfected): Offer a minimum set of features for free, but charge for premium features, more storage space, and so on. (Think LinkedIn,SurveyMonkey, Dropbox and myriad online games.)
But what if you’re selling content, such as articles or advice? Then the key is knowing how much to give away and how much to charge for. We strike this balance by distinguishing between the two crucial parts of any training program:
1. Teaching a specific process for how to do something (value a company, research and pitch a stock, etc.).
2. Giving examples of how to apply that process and use it to solve a specific problem.
Our strategy: We give away either the process or the examples—but if you want both, you have to pay.
For example, we recently beefed up our menu of courses by adding a comprehensive case study of Silver Lake’s potential $24 billion leveraged-buyout of Dell Computer. But we’re also giving away parts of it for free—hours of video tutorials, Excel files, and more—to our newsletter and YouTube subscribers.
Why would anyone pay for the full case study if we give away so much of it for free? Because paying customers get both the process—a step-by-step walk-through of every last detail and how to evaluate Dell as an investment—andexamples of how to apply all of the concepts. Our free members still get a lot of value, but it’s in the form of “examples” rather than “process” because we only cover a few parts of the full tutorial (e.g. how to factor in the taxes owed on repatriated cash used to fund the deal). Result: Everyone gets some value, but those who pay get a lot more.

Mistake #3: Tracking The Wrong Metrics (Or None At All)
Mastering freemium means managing the metrics. Data abounds, yet too few content creators—even those well-versed in freemium—can answer the following questions:
— What is the total cost required to create this free content, or to offer this service for free to X number of users?
— For how long will the free content keep driving in new customers? (Five years? Ten?)
— How often does the content need to be updated, and what are the all-in costs of updating it?
— What is the expected return on investment in offering this free content?
I’ve tracked the time and money required to create our paid products down to the level of individual staff minutes (using loggingit.com and Excel), and I have data on how well everything has sold over the years. I know the numbers on the free content, too. That data helps me figure out how to allocate precious resources in the future.
Before creating new content, I’ll run through the following exercise:
— This article might result in X number of search engine visitors and referrals each month based on the keywords we’re targeting.
— Using our email-newsletter-conversion rates and product-conversion rates, those visits might result in a value of $Y in Years 1-10, where $Y = Annual Visitors * Email Newsletter Sign-Up Rate * Product Conversion Rate * Average Customer Value.
— The content will require W hours to create, which costs about $Z.
— Based on the ratio $Y/$Z, this content is a [lower / higher] priority than everything else.
The exercise isn’t about precision—it’s about order of magnitude. The goal is to avoid spending $10,000 on something that might only generate $100 in revenue. So, if the ratio $Y / $Z for one content plan is, say, four times as high as the ratio for another plan, you can feel more confident about pursuing the first plan. But you have to track the numbers to do it.

Mistake #4: Not Guiding Prospects Down The Path
If your freemium strategy amounts to a simple call to action—“Here’s a free sample… now sign up for the paid version to get even more!”)—then you’re in big trouble. To convert prospects to paying customers, you have to guide them down a specific path. Here’s one way:
Step 1. Create a “general purpose” path that offers free content / tips / services to prospects who are interested in your topic, but not yet convinced they have a problem or that they need a product/service to solve this problem.
Step 2. As they proceed on that path, ask if they want to learn more about a specific topic / solve a specific problem / take advantage of a premium feature—and be perfectly clear about what’s in it for them.
Step 3. Deliver free content and/or a free service that solves part, but not all, of this problem and illustrate the benefits with case studies, testimonials, and client success stories. Throughout this sequence, offer multiple opportunities to sign up for your paid product or service.
Step 4. If the person signs up, great! At that point, offer quick start guides, tutorials on using the product/service, and all the excellent support you can.
Step 5. As part of that post-purchase period,  ask what the next problems they want to solve are and go back to Step 3 to offer more free tips, tutorials, and services that solve some, but not all, of these problems.
Step 6. If the prospect doesn’t bite on any of the paid products or services, that’s okay. Just go back to Step 1 and continue to stay in touch, offering more of your topical content and building the relationship.
We do all of the above with a strategic barrage of emails, postal mail and (for existing customers) phone calls. The system grows in size and complexity each month. As an example, the arsenal might include:
— General newsletter. This might feature weekly tips and interviews on the finance industry and tutorials on specific areas such as resume writing, networking, and interviewing.
— Interview-prep content. If someone signs up and clicks a link indicating that she wants to learn more about how to ace a job interview, we would start sending over free tips and tutorials on that topic, with occasional prompts to sign up for our paid interview guide.
— Post-purchase content. Say the person bought that guide. At this stage, we begin offering additional tips not found anywhere, and customers only receive these as a reward for continuing to open our emails. Along this path, we’ll offer opportunities to learn about more advanced topics (e.g. financial modeling or industry-specific nuances), structured tutorials, and other bundled packages.
Sound too time-consuming to set up and maintain? I hear that a lot. But really: What else are you going to spend your time and resources on? Creating random free content or promotions with no real structure or strategy?
I once considered creating free promotional sequences for all of our entry-level products. (More free tips and tutorials could only help boost conversion rates, right?) After way too many lost hours, I scrapped much of this work and focused the teaser sequences on: 1) higher-priced courses (because entry-level products are rarely the best candidates for comprehensive promotions), 2) customers who had already paid for entry-level courses and might be looking to learn more, and 3) courses where conversion rates could be substantially improved.
Remember: If you want to lure customers without giving away the store, stick to the four freemium fundamentals: Choose the right market; distinguish between free and paid content in a way users care about; track the metrics that matter; and create clear “paths” for promising prospects.
Do all that and you’ll turn your freemium fantasies into real profits.