What is Freemium?
Freemium was first proposed by Fred Wilson of AVC in 2006. It refers to attracting users with free services, and then converting some free users into paid users through value-added services to realize monetization.
The Freemium model involves the "80/20 rule", which means that a small number of high-end users who are not sensitive to price are willing to pay for some additional features and bring most of the revenue to the service provider.
The "Freemium" approach did not first appear on the Internet, but in the traditional software industry. Companies will provide some free trial versions, and users can choose to purchase paid premium versions after using them. Currently, many well-known software companies are still using this approach, such as Kaspersky, which provides a non-upgradeable free version.
Mode Features
1. In the Freemium model, most content is generally free (90-95% of the content is free, and 5-10% of the content is paid). Although the initial investment cost of Internet companies is very high, the service marketing cost is almost zero. Therefore, the profit obtained from paid services can quickly make up for the investment in free services and acquiring new users.
2. The Freemium model makes great use of the positive effects of the network. The network effect is also known as "network externality" or "economy of scale on the demand side". It refers to the phenomenon that the more consumers use a product, the greater the utility that individual consumers obtain when using the product. The telephone is the most typical example of the network effect. In the game, the more players there are and the more active the server is, the stronger the players' willingness to pay will be.
3. Based on the network effect, the Freemiun model provides service providers/creators with more ways to make profits, such as attracting a large number of users through free services, and then using users to attract advertisers, merchants, etc. who are willing to pay.
Key Benefits
1. Free is the inevitable trend of the Internet
Free is an inevitable trend of the Internet and it is unstoppable. The current era is different from the past. Users no longer need to spend a lot of money to find the information they want. If you insist on adding a payment threshold to your service, a large number of users will be blocked. In the game, a typical example is Legend. As private servers become more and more rampant, big Legend service providers began to choose to learn the model of selling props from private servers and canceled the point card model. Facts have proved that this effect is much better than the profit effect of the point card model.
2. Reduced user education costs
"Freemium" no longer requires spending a lot of advertising money to introduce the various features of your service to users. Instead, through free trials, users can learn about your services and become familiar with the services provided by the service provider. Obviously, if a payment threshold is set for users at the beginning, paying users will regard themselves and the service provider as simply "Party A and Party B". Users will be less willing to explore on their own and will be more willing to let the service provider teach them step by step. Not only do service providers need to spend a lot of time and money to deal with these customers, but their reputation may also be affected by poor service. A low payment threshold and high service costs are not cost-effective (you can't expect users to pay a lot for your product right from the start).
3. Cheapest marginal cost
Products with too high marginal costs cannot use the Freemium model at all, because too many free users will rapidly increase the operating costs of the enterprise to a level that you cannot afford. For example, before the development of the Internet (or communication methods), if you were a consulting company (or any other service company), you could only receive a limited number of customers. If you needed to receive more users, you could only expand the scale of the enterprise (larger office space, more employees). But after the development of the Internet, you can assist one or more customers in solving problems remotely, and no longer need a larger site and more employees.
Disadvantages (for the gaming industry)
These shortcomings are more for players. To sum it up in one sentence, additional paid content will definitely affect the player experience.
1. The game process must be interrupted
Obviously, the freemium model makes it impossible for game creators to charge for their games. They can only charge through in-game store transactions, loot boxes, battle orders, etc. Let alone the impact on balance, charging during the game means interrupting the player's immersive gaming experience. Imagine that you are fighting a game boss and suddenly a pop-up window pops up - "You only need to pay XXX to get XX, I wish you a helping hand."
I think this has a very bad impact on the gaming experience.
2. Free users are also part of the paid user experience
For multiplayer online games, in order to highlight the difference between paying users, free users are also directly or briefly designed as part of the paid user experience. For example, paying users have more shiny costumes, stronger combat power, and more eye-catching logos. Due to the psychology of admiring the strong, some ordinary users will want to follow paying users, and paying users will enjoy this "sense of identity". After enjoying the sense of accomplishment and identity brought by this "privilege", paying users will pay further, resulting in further imbalance in the game. The real satisfaction is not "what can satisfy me" but a situation of "I can satisfy you but you can't". It is because of this mentality that 20% or even less users bring 80% or more of the revenue for the entire game. There are more things involved, and I will talk about it later. Back to the topic, I think this is out of the original intention of playing games. The design focus of the game is on paying users and numerical balance, and the gameplay is not the most important part. This kind of game is not a game, but a way to spend money to satisfy a certain desire/psychology.
3. Game quality is getting worse
When a game is designed to highlight the uniqueness of paying users, the game mode is no longer the most important thing. This is why there are so many skin-changing web games and online games now.
When players are no longer willing to pay for these low-quality game contents, game developers begin to turn to advertisers for profit, and thus various games that require frequent viewing of small ads appear.
These problems cannot be entirely blamed on game companies. Users determine the content to a large extent. With the development of the Internet and mobile devices, it is becoming more and more convenient for users to play games. More users tend to play games on their mobile phones. Fragmented time play and quick feedback have become one of the labels of today's games.
We need truly good games, not simple, convenient and quick pleasure feedback.