“Freemium” model isn’t just for smartphone apps

We have been hearing a lot about the “freemium” pricing model lately. “Freemium” is a combination of “free” and “premium”. This model is most common in smartphone app stores where developers give away the app for free, but users may choose to pay for feature upgrades.

Examples of paid upgrades include:

  • Instant gratification (no more waiting): E.g. Buy Smurfberries in Smurf Village to grow crops instantly, or master weapons in Infinity Blade 2 instantly.
  • Cosmetic upgrades: Dress up and customise your gaming character (avatar)
  • Cheating upgrades: Help you to progress to the next stage by making the gameplay easier. E.g. buying “bombs” in Draw Something to remove letters from the word pile.

This pricing model is brilliant as it offers a risk-free proposition for the user to try it. It overcomes the psychological barrier of downloading.

If they like it enough, they can continue playing it for free or choose to pay for upgrades. There is usually no loss of critical features in the free version. Even if the customer doesn’t upgrade, the app developer is still supported by ad revenues.

There are secondary benefits too. If the app garners enough downloads, it starts to appear in the “Top apps” or “Trending apps” categories, which in turn increases its exposure further and kickstarts a virtuous downloading cycle.

This is one reason why some apps appear to explode onto the scene overnight, the latest darling being Draw Something, with over 35 million downloads and 1 billion drawings in slightly over a month. The developer of Draw Something, OMGPOP, has just been acquired by the big daddy of online gaming Zynga at a valuation of over $210 million.

No wonder this NY Times article on freemium games is titled “Playing at No Cost, Right Into the Hands of Mobile Game Makers“.

Now, what’s really interesting is that the freemium model isn’t restricted to just smartphone apps.

One novel application I have noticed is in digital e-books. Amazon is making a big push in this area with its Kindle e-reading devices and software. Kindle owners are able to borrow as frequently as one book per month from the Kindle Owners Library.

Currently the library has a collection of about 20,000 books and rising. The exciting news is that it includes some current best-sellers, such as the Hunger Games trilogy.

Initially, I applauded Amazon for adding value to their Kindle devices. But it later dawned on me that they have their eyes on a different, and much bigger, prize.

Let’s take an example: say, I borrow The Hunger Games (first book of the Hunger Games trilogy). I finish it in 2 days and am itching to get on to the sequel, Catching Fire.

But I have to wait till the start of the next calendar month before I can check it out from Amazon’s library. So I have two options: I could wait a few more weeks, or I could buy the Kindle book and read it within 60 seconds.

This is a freemium model in disguise. I get a product for free, and at the same time, there are incentives pushing me to spend on upgrades (instant gratification in this case).

I believe this reader psychology applies well to non-sequel books as well. Waiting is tough when the rewards are dangling right in front of your face.

Here’s another example of the freemium model in e-books. Jon Konrath is a writer who has published both with traditional legacy publishers, and gone down the indie publishing route as well.

I had downloaded his compendium of blog posts The Newbie’s Guide to Publishing (Everything A Writer Needs To Know) as a free Kindle sample. In one chapter, Mr Konrath discussed the importance of planning an outline for your writing in advance, in such detail as to cover some 30 to 40 pages. 

At this point, I think “Well, that’s a great concept, but I’m not sure what an outline really looks like”, and on the very next page, he offered a direct link to download an outline for one of his other published books, for free.

This accomplishes two objectives. Firstly, I now know exactly what he’s talking about. Secondly, I am now curious how this outline translates to the finished book. Which encourages me to buy his Kindle book.

The outline is the freebie, and the Kindle book is the paid upgrade.

Mr Konrath is a genius at marketing. With every freebie he dangles in front of you, he not only increases the value he is providing you, but at the same time, he gives his sales a subtle push.

There is truly no such thing as a free lunch, but in this case, I’m too happy to notice.

About Hun Boon

A little bit of this, a little bit of that.
This entry was posted in Books, Entrepreneurship, Technology and tagged , . Bookmark the permalink.

One Response to “Freemium” model isn’t just for smartphone apps

  1. sqyong says:

    Hey… lately I’ve been doing some readings on freemium too… indeed it’s everywhere!

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