What are freemium apps

Freemium

Freemium is a marketing model for software and media in which a free basic product as well as chargeable extensions or a chargeable full product are offered. Freemium is an artificial word made up of “Free” and “Premium”.

Functional principle [edit]

Freemium is mainly used for smartphone apps and web-based software, but other media such as books or online newspapers can also be monetized using this marketing model. The basis is always a free basic version. In contrast to a trial version of other software, use here is not limited in time and the function itself is not restricted. The user can generate a benefit from the basic application alone. In addition, however, he has the option of expanding the range of functions by making a payment. There are several models here:

  • By purchasing a full version, existing advertisements disappear in the basic version. The function itself either remains the same or is additionally expanded.
  • By paying the full price, the user acquires the software and gains useful functions or extended features (e.g. more storage space).
  • The basic version remains, but the user gains individual extensions through so-called in-app purchases. Each user decides for himself which individual functions he would like to activate.

This video shows more about the psychology behind freemium.

Aim of freemium [edit]

Freemium offers are predominantly offered in order to capitalize on a free service. The provider relies on the fact that some of the users will sooner or later reach the limits of their use. They then convert to paying customers who want to use the premium features. But the users of the free version also help the provider, as they can tell others about the offer and thus generate more premium customers.

Examples of freemium offers [edit]

Some well-known examples of freemium offerings are:

  • Skype: With Skype, users can use the messaging service free of charge and make phone calls. However, calls to mobile phones or foreign landlines are charged.[1]
  • XING: The XING social network is generally available free of charge. With the paid premium membership, on the other hand, users benefit from extended search functions for people, find out who has viewed their profile, can also write to non-contacts via PM and use XING without advertising.[2]
  • Flickr: With the Flickr photo service, users can hide advertising or double the storage space for a hefty surcharge.[3]
  • Mailchimp: Everyone can use an extensive basic account with the Mailchimp newsletter service. However, if you want to send very extensive newsletters, you pay a monthly flat rate.[4]
  • Adobe Acrobat Reader: Acrobat Reader is free software for reading PDFs. While this software can be downloaded free of charge, the counterpart to creating PDFs, Adobe Acrobat, is chargeable and was even unrivaled in this area for a long time.

The freemium model is just as important for games, especially online / browser games and in apps for smartphones. The user downloads a fully functional basic version here for free. During the game, however, in-app purchases are increasingly required in order to continue playing. Otherwise, there will be disadvantages compared to other players who make these purchases or the player will have to accept long waiting times because individual activities of the protagonists then take several hours to days.

Criticism [edit]

Particularly in the case of freemium games, it is often criticized that the games are ultimately significantly more expensive than if a comparable game had been purchased in a full version. Cost control is made more difficult for the player thanks to the conversion into an internal currency (e.g. coins). There are cases when players spend three or four digits on a freemium game. If you want to buy a larger amount of the internal currency, you have to pay 80 euros and more at once.[5]

Advantages and disadvantages for entrepreneurs

Freemium can help entrepreneurs sell a new type of service that the consumer doesn't even know they need. The free trial offer attracts users and convinces them to buy the premium offer. This principle works all the better when the value of the product increases or the inhibition threshold for opting out increases. For example, anyone who has once set up all of their corporate communications in one email program is reluctant to switch to another provider spontaneously due to the high effort involved. A player who has already invested a few hours in a browser game is usually happy to accept a few euros in fees in order to be able to continue playing.

The problem with the use of freemium is the cost situation. It is difficult to predict what costs may arise as the user base grows. In addition, there is no telling how high the conversion rate will be for the premium users whose payments are supposed to cover the costs. In addition, many entrepreneurs find it difficult to achieve the right mix of free and premium features. If you release too few functions in the basic version, the users lose interest or cannot test extensively enough. However, if too many functions are activated, hardly any free users will convert to premium customers.

References Edit]

  1. ↑ The Skype tariffs. Skype.com. Retrieved on May 21, 2014.
  2. ↑ XING Premium Membership. XING.com. Retrieved on May 21, 2014.
  3. ↑ Flickr relaunch: 1 terabyte of storage space free of charge for everyone. Maclife.de. Retrieved on May 21, 2014.
  4. ↑ Price calculation for many recipients. Mailchimp.com. Retrieved May 21, 2014.
  5. ↑ Rip off: Why Freemium is neither Free nor Premium. Techstage.de. Retrieved on May 21, 2014.

Web links [edit]