With the recession stubbornly lingering, many small and medium businesses (SMBs) are still pinching pennies and looking to trim expenses. Dimdim, which provides free Web conferencing for up to 20 users, and charges just $25 per month for Dimdim Pro (which supports unlimited meetings for up to 50 users) gives SMBs a way to eliminate or cut Web conferencing costs painlessly.

Dimdim’s radical contention is that Web conferencing should be free for small meetings, and less costly for larger ones with more bells and whistles is certainly grabbing the attention of Web conferencing users–as evidenced by Dimdim’s assertion that 5 million people in 195 countries are now using Dimdim for about 3 million minutes every day. It also must be rattling the likes of Webex, Citrix GoToMeeting and other web conferencing vendors, whose services look pretty pricey when stacked up against Dimdim. How does Dimdim do it, and can the vendor make this model work?

How Does Dimdim Do It?

Dimdim employs a freemium model, but there’s nothing chintzy about the services it provides. Dimdim provides audio, web and video conferencing features, along with desktop sharing, and support both Windows and Mac operating systems. No download or invite is required to join a Dimdim conference–all you need is a URL to join. One click from the URL whisks you to the presenter’s desktop–making it ideal for ad hoc meetings. Once you’re in the conference, you can see the presenter on a video screen (two-way video also lets him see you–if you’ve changed out of your fluffy bathrobe and give permission) and chat online and via the audio line. You can also record your Dimdim meetings in the paid version.

The service is available in 3 flavors:

• Free, for up to 20 meeting participants.
• Pro, for up to 50 participants, with additional capabilities for custom room branding (you can remove the Dimdim logo and pop in your own), and mashups for integrating Dimdim with other tools. Pro pricing is $25/month.
• Webinar, priced at $90/month, which adds meeting reporting and analytics and supports up to 1,000 attendees.

Dimdim’s goal is to be the “iPod of Web conferencing services.” We’ve been using Dimdim for many of our SMB Group web conferences for over a year, I can vouch that it’s clean, simple interface usually lives up to this promise (I’ve had a couple of glitches with downloading the code to share my screen, and full screen never really seems to take up the full screen, but other than that, all has been good). In fact, there has been more than one occasion when a client was using a pricier Web conferencing service that crashed out, or didn’t work on my Mac. So, we fired up Dimdim and were back in the meeting in just a couple of minutes.

Backed by several million dollars of capital funding from the likes of Draper Richards, Index Ventures and Nexus India Capital, Dimdim has built its offerings on open source software and leverages Amazon S3/EC2. Dimdim makes its source code available to developers and others so that they can tailor it to their requirements.

Will Dimdim Make the Freemium Model Work?

As we discussed in the SMB Group’s 2010 Top Ten SMB Technology Trends, there’s no such thing as a perpetual free lunch. Vendors using the freemium model have to scale and convert some percentage of their users–typically 5 percent to 10 percent– to their paid offerings.

As Dimdim passes the 1 million registered users bar this month, it is scaling up to the kind of volume it needs to make this model work. The vendor also indicates that it is on track and achieving critical conversion goals. To keep the pipeline growing, Dimdim proactively encourages referrals via its Dimsum program. Dimdim users (even free ones) can refer friends and colleagues to try or buy Dimdim  can earn up to $120 per referral. Dimdim also has an affiliate program for those who want to promote Dimdim solutions directly to their customers or online audience (FYI, neither I nor the SMB Group is a Dimdim affiliate).

In March, Dimdim also started private labeling and selling its solutions through some big providers, which already account for 20% of its business. In addition, Dimdim is taking advantage of application marketplaces, such as Intuit Workplace and Google Apps Marketplace, to gain market traction.

Dimdim’s Web conferencing service is innovative and easy to use. By making the free service available for up to 20 attendees, enabling 1-click meeting attendance, and putting the Mac on a level playing field with Windows, Dimdim has removed many barriers to using Web conferencing. While the combination of rapid, high volume viral growth and paid conversions is a tough code to crack, it appears that Dimdim has developed a successful formula to make the model work.