The overall point-of-view here is much better than the original "freemium is not a business model" article. Our company views free accounts as a marketing tool and lead generator; It is a great way to generate some trust and excitement into potential customers that may convert into paying customers at some point down the road.
I would say most companies fail with freemium because its an afterthought. I've seen a few start-ups build out an entire featureset, get a ton of people to use it, and then think, "Well gee whiz, how are we going to make money off of this?". Then they will attempt to monetize their product off of some non-core features. This just won't work.
build out an entire featureset, get a ton of people to use it
Bingo - if you can't identify an appealing, useful subset of your features that is too small for enough paying customers, then you should not do freemium. You can't unring "free" once you've taught it to your customers.
I would say most companies fail with freemium because its an afterthought. I've seen a few start-ups build out an entire featureset, get a ton of people to use it, and then think, "Well gee whiz, how are we going to make money off of this?". Then they will attempt to monetize their product off of some non-core features. This just won't work.