Freemium

Freemium, a

The business model has been in use for software since the 1980s. The term freemium to describe this model appears to have been created much later, in response to a 2006 blog post by venture capitalist Fred Wilson summarizing the model:^{[3][failed verification]}

Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium-priced value-added services or an enhanced version of your service to your customer base.

Jarid Lukin of Alacra, one of Wilson's portfolio companies, then suggested the term "freemium" for this model.

In 2009,

A freemium model is sometimes used to build a consumer base when the marginal cost of producing extra units is low. Thus little is lost by giving away free software licenses as long as significant cannibalization is avoided. Other examples include free-to-play games – video games that can be downloaded without paying. Video game publishers of free-to-play games rely on other means to generate revenue – such as optional in-game virtual items that can be purchased by players to enhance gameplay or aesthetics.^{[citation needed]}

Types of product limitations

Ways in which the product or service may be limited or restricted in the free version include:^[11]

• Limited features: A free video chat client may not include three-way video calling. Most free-to-play games fall into this category, as they offer virtual items that are either impossible or very slow to purchase with in-game currency but can be instantly purchased with real-world money.
• Limited capacity: For example, SQL Server Express is restricted to databases of 10 GB or less.
• Limited use license: For example, most Autodesk or Microsoft software products with full features are free for student with an educational license. (See:
  Microsoft Imagine.) Some apps, like CCleaner
  , are free for personal use only.
• Limited use time: Most free-to-play games permit the user to play the game consecutively for a limited number of levels or turns; the player must either wait a period of time to play more or purchase the right to play more.
• Limited support: Priority or real-time technical support may not be available for non-paying users. For example,
  Comodo
  offers all its software products free of charge. Its premium offerings only add various kinds of technical support.
• Limited or no access to online services that are only available by purchasing periodic subscriptions

Freemium games have come under criticism from players and critics. Many are labelled with the derogatory term 'pay-to-win', which criticizes freemium games for giving an advantage to players who pay more money, as opposed to those who have more skill.^[16][17] Criticisms also extend to the way that the business model can often appear unregulated, to the point of encouraging prolific spending. Freemium games are often designed in a manner where players who are not actively using premium features are actively frustrated, delayed or require much larger investments in time required to acquire currency or upgrades.

In November 2014, the animated TV series South Park aired an episode entitled "Freemium Isn't Free". The episode satirized the business model for encouraging predatory game design tactics based on an improper business model.^[18] In 2015, Nintendo released two of their own freemium games in the Pokémon series based on other standalone purchasable titles.^[19][20] With the title Pokémon Rumble World, Nintendo took a different approach by making it possible to complete the entire game without buying premium credits, but retaining them as an option so players can proceed through the game at a pace that suits them.^[20]

See also

• Business models for open-source software
• Crippleware
• Pay to play
• Pay what you want
• Shareware
• Threshold pledge system

References