Serious games and learning effectiveness: The case of It’s a Deal!This chapter, “The Freemium Business Model,” introduces the freemium model from a conceptual, academic, and practical standpoint, establishing several fundamental considerations that are used throughout the book. Although the freemium model is a fairly recent development, having been popularized with the widespread adoption of mobile smartphone devices and tablet devices that are constantly connected to the Internet, its roots exist in a business model that was prevalent in the 1980s called feature-limited software development, which was distributed on physical discs.
The chapter begins with an overview of the principles of the freemium model, which offer conditions and requirements for freemium success. These principles are scale, insight, monetization, and optimization. The chapter then addresses three economic concepts that render the freemium model viable: the price elasticity of demand, price discrimination, and Pareto efficiency. The chapter ends on a practical note with case studies of three freemium success stores: Skype, the peer-to-peer calling product; Spotify, the streaming music service; and Candy Crush Saga, the casual puzzle game from developer King.