The term freemium, which combines the words "free" + "premium", was coined by Jarid Lukin of Alacra in 2006 after venture capitalist Fred Wilson developed the concept.
The freemium business model was first articulated by venture capitalist Fred Wilson on 23 March 2006.
"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base."
Source(s):
Fred Wilson's Blog: The Freemium Business Model -
http://www.avc.com/a_vc/2006/03/the_freemium_bu.ht...