The Pilot Report is a blog series which details some of the stuff our pilot companies have been working on. This week our post is from the 12 Mile Radius blog. Click here or the title of this post to visit the 12 Mile Radius website.
Many mobile game these days are heading towards the freemium model of purchasing. According to one article (see it here) almost 40% of the top 100 games on the app stores are freemium model. So why the trend? It seems that Freemium model games get more profit, as it lures someone in with a free game and then offers enticing rewards for only a dollar or two. And then it’s a steep descent into pumping a lot more money into the game. Check the example of Stardunk, a game by Godzilab. They now have over 1.7 million downloads of their game and are netting much bigger profits than when the game followed the premium model.So how do the companies make more money this way? Seemingly people would be more willing to pay a one-time fee of 1$ and then have unlimited access to content rather than having a free game with restricted content for which you have to pay.
They make money from two different ways: outliers and the “lost investment” phenomenon. Outliers just refer to those people who will spend hundreds of dollars on a game merely because they have nothing else to do with it. If you think about it, one person spending $1,000 is the same as 1,000 people spending $1. So when the business analytics get released, these things don’t get mentioned.
The “lost investment” phenomenon is the idea that people don’t like to lose something that they’ve spent so much time on. For example, people will continue to play a game such as Farmville, even if they no longer find it enjoyable, merely because they don’t want to lose all of the things they’ve grown and everything they’ve worked so hard to achieve when they stop playing.This applies to the freemium model in that it requires a continuous amount of revenue to maintain the game in the way they want. Most games you can’t really get away with one-time purchases if you wish to have the best. You have to keep pouring money in, and once you’ve already done it once or twice, you don’t want to stop.
So is it a good business model? Only if done correctly. As it says in the Godzilab article mentioned above, you have to go about it the right way, and many games don’t lend themselves to that correct manner of freemium model.
We at 12 Mile Radius, however, think that the freemium model will not lend itself to the games we are trying to make. Additionally, the freemium model doesn’t work with the games that we want seen in the market. Next week we’ll have an article explaining this more and explaining our view on the market of mobile phone games.