patterns 103 free as a b usi ness Model cost of service indicates the average cost the company incurs to deliver a free or premium service to a free or premium user. The freemium model is characterized by a large base of free service users subsidized by a small base of paying users. Users enjoy a fr ee basic service and can pay for a premium service that offers additional benefits. percent of premium & free users specifies how many of all users are premium paying users or free users. growth & churn rate specifies how many users defect/respectively join the user base. price of premium service indicates the average cost the company incurs to deliver a premium service to a premium paying user. customer acquisition costs total expenses a company incurs to acquire new users. bmgen_final.indd 103 6/15/10 5:38 PM