Freemium model

From SI410
Revision as of 20:07, 27 March 2020 by Sgetty (Talk | contribs)

(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)
Jump to: navigation, search

Freemium: Free, Free, Free, but not one hundred percent Free. Have you ever been reading a very interesting article to only get halfway through and see: “You must subscribe to continue reading”? This is the crutch of the Freemium model. They draw you in for free and then in order to move further along you must pay. Freemium is a business model used by many companies in many products. Used in many commodities across the world including one that affects all of us at this current point in time, Zoom. As buisness models go the Freemium model is relatively new but because of its involvement in technology, it is one of utmost importance. Freemium products range from web video services, to news services, to video games, and many more forms. If used correctly it can serve to make an item that would nirmally cost money for everybody be available to all. Those who only wish for limited services can access them for free, while people willing to pay can use the full range of capabilities of said product. However, it can be corrupted to prey on people who can be easily influenced by social pressures such as children to pay more money for a product.

Annotation 2020-03-13 162353.png


The Freemium model has been around since the 1980s, although the term Freemium[1] came into use around 2006. The term was created by Jarid Lukin of Alacra, in repsonse to a blog post by Fred Wilson. Freemium is a combination of the words free and premium. The Freemium model is a business model where the product or service can be bought for free but in order to use other features you have to pay an additional cost. Muliple books have been written on this subject, Free by Chris Anderson and Freemium Economics by Eric Seufert. Freemium Econmics discusses the introduction of freemium implementation in software products. The Freemium model comes in a variety of forms: video games, newspapers, storage sites like Dropbox, Amazon web services, etc. The Freemium model is tier based one with a free tier and then successive tiers of paying for expanding features. One example is Zoom. Zoom is video Conferencing app that allows a person to communicate with others. One person can host many others in a single meeting and use screen sharing. By upgrading, paying more money, you are allowed enhanced features such as; longer calls, more people, more storage, and greater technical support. This is an example of the Freemium model being used in an ethical fashion that allows everybody the ability to use this service. Below is a list Freemium products[2].

Video Games

The most common form of a Freemium product is a video game. You acquire a game for free but it comes with many features that require in app purchases. This can range from a unique skin change to upgraded weapons that are unavailable without paying. The latter is a reason that some Freemium games are also called Free to Play; Pay to Win games. This is one of the main ethical issues when it comes to this model. Below is a list of Freemium games[3].

Ethical Issues

The Freemium model is open to a whole series of ethical issues. Beginning with that their products are advertised has free, but in reality most have a cost to actually using said product. The ethical issue in this case is: are the producers of such products lying to their customers? In some of these products you can use it almost completely without having to pay, but in others you have only minimal functions for free.

Free to Play; Pay to Win maybe the biggest complaint with Freemium games. This model of game gives a big incentive for paying for upgrades in order to better position yourself. It creates a never-ending cycle of kids seeing others pay to be better and then in turn these people pay to get on equal footing. One mobile app video game where this is very prominent is Clash of Clans. In Clash of Clans you can pay to get more resources that allow you to skip the normal wait time for upgrades. These in app purchases allow a player to become exponentially better at a fraction of the time. This type of game also preys on kids who have access to a parent or guardian’s credit card where they can spend hundreds of dollars before their guardian is even aware of the situation. This situation produces a couple of ethical issues, is it fair to other players to allow the game to essentially be pay to win and is it ethical for companies to be targeting an age range where the person may not understand the true monetary cost. The production companies use social pressures, showing players rank, to persuade kids into paying more money. Some examples of this issue: “A Belgian teenager spent $46,000 on purchasing in-game currencies using his grandfather’s card”[4], “A 7-year-old kid has recently spent almost $6,000 on the Jurassic World iPad game’s in-app purchases, including $2,200 spent in just one hour”[5], and “the 11-year old boy spent close to $7500 on virtual items, It took him very little time, too – $875 were gone in 5 minutes, then $1376 in half an hour.”[6] Some blame also has to be put on the customers here for not making it harder for their child to access their credit card.

Another ethical issue with Freemium model is that companies do not always advertise the limited features you will be allowed to use if you only use the free version of said product. This restriction varies in multiple ways: limited features, limited capacity, limited use license, limited use time, and limited support. This is part of the strategy for this business model, hook the customer for free then introduce paying. Just as with the previous issue, this one can also be partly placed on the customer as most people tend to not read the fine print when acquiring a product.