Is Freemium Truly Premium?

Technology is changing at a rapid pace, and this evolution is essentially always paired with changes in business practices. A few years ago, the distribution of games and apps was pretty straightforward. Commercial apps were primarily distributed as paid-only (usually paid once per license), while other applications were distributed as freeware, shareware, or trial. Our favorite open-source mobile operating system, Android, is no exception. A few years ago, Google decided to implement a new method of app distribution. Since 2011, the freemium distribution model has dominated the market. Every day, “free” apps and games bring Google (and the third party app developers) quite a bit of revenue.

I pay more, so I’m better

What exactly is freemium? Imagine the situation where you and your friend are playing the same game. Both of you started playing at the same time and your friend is a few levels ahead of you. You spent a similar amount of time playing, so what’s going on? Is he or she better than you at the game? Not necessarily! He or she could have spent real money to speed up the game or get cooler items, weapons, etc. But technically, you didn’t have to pay a cent to download or play the game. This is how freemium works; it’s “free” to use, but in practice free ends up being in quotation marks. Freemium applications and games generate up to 98% of overall monetary revenue that Google and app developers receive (in 30/70 proportion). Apps and games that follow the freemium model allow free users to use most of the available functions or game modes. Paid content then often extends to features such as automation, ad removal, or simply the ability to use the app or game longer. In-app purchases are registered to your user account with the Google Play Store, so you don’t have to pay twice for the same function when you change ROMs or wipe your device.

Free + Premium≠ Freemium

Let’s stop for a while and learn more about freemium. The true etymology of the word isn’t clear. American businessman Fred Wilson, who is believed to have uses this term for the first time in 2006, described it as something actually in between free and premium. While this definition is quite accurate, we should also take in mind that there is the latin word mium, which means “not really.” In practice, both definitions are correct in their own way, and describe the nature of the model quite accurately.

Freemium made its way to mobile operating systems a few years ago. It was initially introduced alongside Apple’s iOS 3.0 in 2oo9. Google needed two additional years to add it to Android. With this model, users can spend a small amount of money to get gems, gold, or new items in games. Such micro-payments also allow you to unlock apps and make them ad-free. It’s a psychologically sound approach. Smaller fees are easier to accept, as one dollar is not $10, $20 or $50–even when the overall amount spent ends up being the same over time. It’s a somewhat worrying trend that was recently highlighted in the TV show South Park. While South Park highlighted the problem in quite a humorous way, it’s highlighting the real social problem: users spent large amounts of money without realizing it at the start.

Closer Look

I decided to take a closer look to see if this “problem” really exists. I took a look at twenty of the top grossing games from the Google Play Store. The result is really quite intriguing. The first eighteen top apps are available to download for free and contain in-app purchases. Some of them are explicitly titled as “Free.” In the top fifty games, only three are distributed as paid only. This shows an interesting trend. Apps available for free generate much more money than their “paid only” equivalents.

Freemium is a big business, which has made many developers quite wealthy. One of the most popular game studios, Supercell, is estimated to be worth a whopping $3 billion. The studio earned $654.000 daily, and that was back in February 2013. This only shows how much potential lies in freemium. Supercell’s developers are not the only ones to use this distribution model. In fact, we’ve seen it become much more popular every day, with many of our site’s own developers adopting this distribution scheme.

Controversies

Freemium is has been under scrutiny by the European Commission for some time. Google and Apple have been forced to inform their users about applications with in-app purchases. This isn’t as effective as it could be, however, as most people don’t care about any kind of warnings. That said, it’s still nice to see that politicians acknowledge the problem and are trying to do something about this.

As a consumer, I personally dislike freemium. However, I would be lying if I said that I never bought an in-game item. In the end, the best way to avoid hefty bills is using your head. The option to spend a few dollars here and there to unlock new features and game items is sometimes quite tempting, but you can often have fun playing without paying a cent. What do you think about freemium? Share your thoughts in the comment section below.

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source: xdadevelopers