Posted July 26, 2011 4:51 pm by with 0 comments

Tweet about this on TwitterShare on LinkedInShare on Google+Share on FacebookBuffer this page

Freemium – it’s a hybrid of free and paid and it’s all the rage in mobile gaming. Try the game for free, play for free, but if you really like it, pay a few dollars for more levels, more detail or a virtual donkey. Who wouldn’t want a virtual donkey? Actually, a lot of people will pass on that offer but it doesn’t matter.

According to stats from Flurry, Freemium games generate more revenue than straight-on paid games and it does it in a surprising way. As you can see from the chart below, only 13% of consumers were responsible for more than 50% the revenue.

The average spend for all freemium gamers was $14, but that’s skewed by the high dollars spent by the top tier. 5% of players spent more than $50 on a freemium game and that’s more than you’d pay for some XBox games.

Part of the reason people spend money to play freemium games is because of the gradual nature of the payouts. It’s like feeding quarters into a slot machine. It’s a quarter, who cares, but before you know it, you’ve slipped a hundred of them into the slot and all you have to show for it is a ringing in your ears and a half hour of excitement.

When designers charge for a game upfront, they’re instantly cutting into the potential profit pool because some people simply won’t take a chance even for .99. And, as Flurry points out, by setting a flat fee, instead of offering upgrades and other premium options, you’re cutting off any hope of landing a whale.

BusinessWeek recently reported about a Zynga player who dropped $75,000 on one game over the course of the year. Yes, those players are rare, but how many do you need? One or two of those more than makes up for the 90% of people who never pay a dime for a freemium game.

Is there a way you can make this model work for your business? Like a free loyalty program with a paid upgrade for better perks? Free samples with a coupon that offers a discount if you buy right now? Or maybe you’re asking customers to pay for a service now that you could give away for free with an upgrade option. I know it’s counter-intuitive to go free when you could charge, but as mobile gaming shows, the result could be even more money in the long run.