The word “freemium” is a combination of the words “free” and “premium.” The freemium business model allows users to use an app for free with the option to purchase premium add-on products in the app. In the case of mobile phone games, the “freemium” model, however, can raise ethical issues about its use and success.
Pokemon Go is an example of a mobile game with the freemium business model. Pokemon Go is free to download and play with users having the option to make purchases for premium items in the game. According to the Guiness World Records, Pokemon Go generated the highest amount of revenue by a mobile game in its first month. Due to it being free to download, Pokemon Go is also the most downloaded mobile game in its first month with 130 million downloads. These records showcase the success of the freemium business model for Pokemon Go. These successes however, come with some ethical concerns stemming from the nature of the model.
Freemium games typically set up a virtual currency for micro-transactions instead of actual money. A virtual currency like PokeCoins in the example of Pokemon Go creates a psychological barrier between the in app purchases and real currency spent. The exchange rates of real currency to in game currency are usually convoluted and prices of in app items are often priced at values that inhibit quick calculation.
In Pokemon Go, $6.98 buys 550 PokeCoins and the price of an incense is 80 PokeCoins This makes it confusing to Pokemon Go’s players how much an incense is in real currency.
A report by Lauren Keating published on Tech Times found that only 1.9% of mobile gamers make in-app purchases. The report also states that the top 10% of the 1.9% of paying gamers account for 48% of revenue from mobile games. These high paying customers are known as whales and are basically financing the freemium mobile gaming industry. Some would argue this is a major issue because these whales almost seem like gambling addicts who keep coming back to lose their money under the encouragement of the mobile gaming companies.
A report from PC Mag talks about how Gondola is able to utilise dynamic pricing in mobile games. Gondola is an app analytics company that claims to be able to track various variables about a mobile game’s players; how long they have been playing the game for, what model of phone they are using, how many in-app purchases they have made and so on. They provide these information to mobile game companies which in turn may tailor the prices of in-app products to individual customers based on their profiles and behaviours. An example of this would be increasing the price of PokeCoins if the data shows that an individual spent a lot of money in the last few weeks. This practice can raise ethical debates on its use as consumers of mobile games with a freemium business model are vulnerable to the tactics the businesses employ.
Some may argue that this model is the best way to attract consumers as people are generally put off by having to pay to download a mobile game. The freemium model has also proved itself to be very profitable despite the ethical concerns. Given the success and widespread popularity of this model, I suppose that the debate will continue for years to come.