What’s Freemium Gaming?

Freemium has become the preferred business model in mobile game development, accounting for almost 93% of mobile gaming revenue in 2013. Many, if not all game developers around the world have adapted their mobile development strategy to harness the power of freemium. As counter intuitive as it may sound, “Freemium” games are in-fact more lucrative than one time purchase games (premium games). If you don’t believe me, then go see the highest ranked games in terms of gross revenue, and there will always be a freemium game in the top 5.

How can a free game earn more revenue?

Well for one, it lowers your barriers to play the game (mainly the cost). However, there are many factors that go into the age old question, “Do I want to play this game?” As a consumer (or a hard-core gamer, if you are one), we always consider factors such as, is this game going to be fun? Or is this the type of game I like? We then price out what the perceived value of the game is to us and then shell out the necessary dollars to buy the game. However in a freemium model, everyone is allowed to play, including Larry and Barry (see below)!

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Price discrimination is the key

So here are the conclusions from our illustration above, traditionally, a single price point was given and you were either in or out. Even if you were in, it’s a one size fits all type of affair. You love this game so much, and even $75 does not seem too bad for such a game? Well, too bad. In addition to losing the revenue upside, by excluding players who have perceived your game to be of higher value, you are also losing the revenue downside, by pricing your game higher than the perceived value.

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To sum it up, Freemium games allow you to price yourself within the game. The revenue upside in the game is a factor of the engagement and the player investment you can have within the game. In the above example, it has in fact almost doubled the revenue that would have been possible with a premium game.

The Evil Side of Freemium Gaming

Well Freemium models in a casual gaming market seem like a no brainer right? Well, it’s not that simple. With hard-core gamers who can purchase a fully featured game between $1 – $100, may now possibly have to shell out a lot more to enjoy the full power of a game. A case in example of the recent launch of “The Dungeon Keepers” game and this reviewer’s scorn for the pricing of the appointment mechanics within the game. It’s very important to remember that a player’s investment in the game should always be balanced out with reasonable opportunities to grind through the game, without making it seem like a Pay to Win strategy.

What do you think?

Freemium Business Models seem to be here to stay in the mobile gaming market. Low barriers to entry means that there will be a lot of games to choose from. Lots of games in the market means a lot of noise and a lot of noise means, it gets harder to stand out. Also with integrated payment systems built into mobile platforms, it makes purchases of in-app consumable items all that easier. As a nation that’s out to build revolutionary products, do you see yourself adapting some of the best practises from this model? Do let us know in the comments below.

“We think more like Product Designers, and less like Product Managers” – Bharath Mohan, Pugmarks.me #PNHangout

(This passage is a summary of the conversation with Bharath Mohan. The audio transcript can be found here.)

Adopters of any new innovation or idea can be categorized as innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%) and laggards (16%), based on a mathematical Bell curve put forth by Everett Rogers in his book titled “Diffusions of Innovations”. The book broadly suggests that if you have a product that is of value, you often times have to pave the path for the consumers to be the beneficiaries of this idea. It’s the product designer’s role to design how a product is used across the dispersion of users. This ultimately determines the principles of design and the features that your product consists of.

bharath-photoWhile I was doing my PhD in IISc, I worked on designing a myriad of algorithms for information retrieval. A typical internet user reads content that could range from currents events, such as the war in Syria, to topics as specific as Product Management. I’ve always dreamt of a system that can bring the most relevant information to a user – without the user searching for it. Pugmarks.me connects the context in which you are browsing through these articles by following the digital trails you leave behind. It then uses its context engine to recommend the next article it considers you should read packaged in a seamless experience.

Designing Pugmarks.me has been an exciting experience, which included research in algorithms, building a real time crawling and retrieval system, and constantly learning from users. We’ve followed some Mantras in our product development – especially because the product requires inputs from multi-disciplinary areas. Everything has to tie in, to each other. Nothing is known prior and has to be learnt along the way. A “product management” approach would not work. A “waterfall” model to design would not work. “Powerpoint presentations” would not work either. Our product management is less of “management”, and more of design and evolution.

The Pugmarks Mantra

Unlike Facebook or Twitter where the problem’s technology core is simple and scaling is complex, our problem’s technology core is complex akin to the likes of Google’s search engine and NEST. Hence, over the past 1.5 years our product has been opened to a smaller set of users which gives us data to refine the product further ultimately paving the path for a larger cross section of consumers to enjoy the benefits of the product.

pugmarks-character-evolutionSome of our Mantra’s are:

  • Be metrics driven: Once we analyse our features metrics we identify ones that are successful and bolster them to make these our ‘super class’ features. While we do this, we bin our users into “Fans”, “Tried but dropped off”, “First day drop-offs”. The ‘tried but dropped off’ is where we focus our energy on. We do data analysis, interviews and direct emails – to understand why they drop off. What we learnt is that they mostly drop off because of the “inconvenience” of a new product; either added latency, extra memory consumption, instability of the browser, etc. These reasons give us new things to work on and improve.
  • Usage versus Users: We are building our product with the goal that even if few users come to try out our product, they all stay back. Between usage and users, we prefer high usage between a small number of users over low usage in a high number of users. If our product cannot engage users for a long time, any amount of marketing will still not help.
  • Focus on real Virality: Virality is often confused with just having a Facebook share or a Tweet button, or slyly making a user talk (spam) about your product in his social channels. Virality for us is the inherent quality in our product which makes the user want to talk about it. We consciously ask ourselves, “What will our users want to talk about Pugmarks to someone else?” These viral loops must be strengthened and not social share buttons.
  • Constantly question your assumptions: In our initial iterations, we felt our users will be concerned over privacy. Soon, we realized that the paranoid would never use us anyway – even if we gave them a lot of control. The ones, who used us, felt we were not building good enough models for them. So, we moved away from user supervised learning to a completely automated learning system. We imagine our current user telling us, “I’ll tell you everything about me. Now help me in ways I’ve never seen before”.
  • Continuous Integration: We never take up features or tasks that take more than two weeks to launch especially one’s which require a lot of people and require extensive build times and planning. If you finish the code and if it’s lying unused, there’s an opportunity cost lost because that code could very well engage a user or maybe incite him to talk about the product to someone else. This is a loss for us, hence, we continuously integrate.
  • Own the full user experience, end to end – From messaging to user touch points to the backend algorithms: A user doesn’t appreciate information until it is delivered in a way that is useful to you and is needed by you. We obviously needed a team that was capable of building this experience end to end. Our team considers every aspect of the product, from the touch points to the user, how the product interfaces with the user and also how the product communicates with the user using the technology algorithm we created.

pugmarks-airplanes#PNHANGOUT is an on-going series where we talk to Product Managers from various companies to understand what drives them, the products they work on and the role they play in defining the products success.

If you have any feedback or questions that you would like answered in this series feel free to tweet to me: @akashj