THE IMPORTANCE OF DESIGNING YOUR FREEMIUM ITEMS

 Freemium is a terms most widely use in game or application developers, it’s a combination of two words which is free and Premium.

When a product is called Freemium it means user can use it for free and then users can buy a premium items or services.

70% of the apps or games in the market is freemium, and the freemium is getting famous, lots of developers look at freemium as the solid business model to generate revenue. Developers are putting their trust and revenue on a small 1- 2% of user that actually buy something from the freemium product.

So this is how the economics works

1.       You put your product in the market as Freemium, meaning it’s Free for any user to download your product, since it’s free you would expect to reach the holy grail number of downloaded application/games which is 1.000,000 download

2.       Since now you have 1.000.000 apps/game in the market, the probability from 1.000.000 million user will buy anything from your apps/games is a small 1-2%. So let’s say the number is 1% meaning there is only 10.000 people buy something from you

3.       From this 10.000 people the average nominal number of their purchase is around 1-2 USD. So from your apps you receive 10.000USD in revenue

The question is : this 10.000 USD is a 1 time hit or is it something sustainable ?, to answer this questions I will ask another question : “what kind of premium items do you provide ? is it a 1 time buy or is it something user has to buy repeatedly ?”

If you tell a user, you have to buy this premium product over and over again, the user will leave you out cold, so the strategy is to make them craving to buy your premium product over and over again, and to know that we need to know what kind of items are sold as Premium items

There are 2 types of premium items:

1.       Durable items : this is something that user buys and the items stays forever

2.       Consumable items  : this is something that user buys and it depleted when used

Seeing the two points I mention above, I can see your having your AHA moment. So when your user buy a building and it stays forever, most likely your user will buy it 1 time only, but if you sells let’s say a energy food to perform some super strength action that depleted after it’s consume, this is consumable items and your user most likely would want to buy another energy food.

According to flurry http://www.flurry.com/ the most item purchased by user are :

In order of their rankings :

Consumable goods : 68%

Durable Goods : 30%

Personalization : 2%

So if you think by selling clothes for user’s avatar is a great source for revenue, think again avatar’s related items are only purchased 2% , so if you want to generate revenue focus on selling consumable items, like energy, food, etc ,

The main point is, designed your virtual item as hard as you design your core engine, it’s where your revenue generates.

Have fun designing your virtual items.