Free-to-play games are all the rage. Dmitri Leonov offers a tri-fold theory on what actually makes sense in the freemium model:
- The Evernote-like Paywall: The way the product is designed, a significant portion of the users will inevitably cross the paywall. The longer you use the product, the more value you derive from it, and the closer you are to hitting the free upload limit. WriteThat.Name is another great example of this. It extracts contact info from email signatures and creates and updates your Google contacts. The free version gets you 40 new contacts per month. Paying $3 per month to upgrade this service is a no-brainer.
- The Dropbox-like Network and its Viral Lift: Dropbox has inherent virality, and its value increases with more users (in order for you to share a folder, the other person has to be using the product). It also doesn’t hurt that users have an additional incentive to invite others to join Dropbox — permanent extra storage.
- Spotify-like Ads: Five bucks a month is a small price to pay to avoid hearing the same commercial every three minutes. From a business standpoint, monetizing ads isn’t the way to go because it requires huge scale to generate significant revenue. So you’re much better off charging a user $5 per month, instead of blasting him or her with ads that may get you a $5 CPM if you’re very very lucky. The Sparrow mail app, for example, gets away with charging $10 to remove an ad unit in a particularly annoying spot.
Does that mean freemium is broken? Our Michael Thomsen broke down what he thinks:
Thinking of videogames as “free-to-play” reminds me of why I hate to play games with other people. In its purest form, play is a creative act negotiated between two people without intermediary. I am not playing when I’m interacting with a videogame, I’m accepting someone else’s rules and experimenting with them, allowing the designer to delimit my instincts for behavior. Doing this with another person feels like a waste of time, an inherent loss of the generative possibilities of play without intermediary limits. Videogames are the experience of being ruled. In contrast, play is the experience of generating new rules in collaboration with someone else. The idea that “play” is free is redundant. It is only ever free. As soon as money is involved it no longer simply “play” but a perverse form of labor, proving one’s worth as a participant in, and exponent of, the zeitgeist.