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.
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