“Free-to-play isn’t just a business model. Free-to-play is a marketing strategy. It’s a way to get people over the hump of trying out your product. It gets rid of the friction that happens when you charge an upfront fee.” Mitch Lasky
What do products Netflix, Apple Music, SurveyMonkey, Stan, Game of War and Monster Legends have in common? They don’t require any purchase to sign up. These companies that all have top grossing apps don’t even require a purchase to first use their products. You can listen to all your favourite music, watch all your favourite TV shows and play mobile games, until your hearts content, or the app requires a purchase to continue.
photo source: http://www.geekbinge.com/wp-content/uploads/2014/11/South-Park-Freemium-Is-Not-Free-Review.jpg
Now at this point you might be wandering, why are these companies so profitable and why is there a ‘South Park’ character telling me Freemium is latin for ‘not really’?
Well to answer the first question I’m going to have to talk about the social media revenue models.
Freemium model: SurveyMonkey & WordPress.
These models works by offering a basic service for free, while charging for a premium service with advanced features to paying members.
The benefits of using this model is if people need the extra features of a website like SurveyMonkey they are going to have pay for the premium. A drawback is if the consumer can get away with using the free product, they’ll never need to upgrade or pay.
Subscription model: Netflix, Apple Music & Stan
These models: Sites using the subscription model require users to pay a fee (generally monthly or yearly) to access a product or service.
The interesting thing about this model in today’s age is that it often works as a freemium model too. Popular video streaming services like Netflix & Stan offer a free months trial for the product and then require a subscription that be cancelled anytime. Other sites like Google Music, Spotify & Apple Music offer a discount such as $1 for 3 months and then require a subscription.
Virtual Goods: Game of War, Candy Crush & Monster Legends
These models: Users pay for virtual goods, such as weapons, upgrades, points, or gifts, on a website or in a game.
The virtual goods model that are successful are the real money makers in online products. In January, app testing firm Swrve released a report stating that half of a game’s in-app purchase revenue comes from just 0.15% of players (which is insane!) This shows that consumers that get hooked on these mobile products, are willing to constantly pay to advance further in a mobile game.
To answer the second question, I’ll have to start with a quote from the South Park episode ‘Freemium isn’t Free’.
“It’s all about finding the heaviest users and extracting the most amount of cash from them. That’s how you get addicts to spend $200 for a game that isn’t even worth 40 cents.” the cackling Canadian game minister explains in the South Park episode.
While the segment is a satirical, biting look at the current state of free-to-play, it’s certainly not off the mark. With mobile games so heavily invested in the model (and with no other as-successful funding methods), it’s not likely to change anytime soon, even if we wanted it to.
With the much seen success of these companies and how they’ve used these social models that revolve around ‘Freemium‘, it’s evident that it is staying around. But it is important to remember for businesses and consumers alike, Freemium is ‘not really’ free.