Dr. Joost Rietveld will present his work on freemium apps.
Freemium and paid products often compete on the same digital distribution platforms. More so than paid products, however, freemium products strongly rely on having a large user base for their value propositions to fully materialize. As a result, freemium products are more “hit or miss” than paid products. This raises important questions relating to which freemium products are best positioned to becoming a killer app, and under what conditions? We argue that those freemium products that unlock strong product-level network effects, which are also released when the platform has a large installed base, have a higher probability of becoming a killer app than both freemium products without these features and paid products with similar characteristics.
We test our arguments using a unique and comprehensive dataset of 9,700 video games released on Steam, the market-leading platform for digital PC games. Results from a treatment effects model show that freemium games with more rather than fewer social features, that are released when the Steam platform has a larger rather than smaller installed base, have a 27.05 percentage points higher probability of becoming a hit. Our findings contribute to the literature on strategy in networked markets, business models and platform competition.
This seminar is a part of the IMS Marketing Research Seminar series.
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