Topic
Freemium
About: Freemium is a research topic. Over the lifetime, 322 publications have been published within this topic receiving 4224 citations.
Papers
TL;DR: In this article, the authors show that willingness to pay for premium services is strongly associated with the level of community participation of the user and the volume of content consumption on Last.fm, a site offering both music consumption and online community features.
Abstract: The content industry has been undergoing a tremendous transformation in the last two decades. We focus in this paper on recent changes in the form of social computing. Although the content industry has implemented social computing to a large extent, it has done so from a techno-centric approach in which social features are viewed as complementary rather than integral to content. This approach does not capitalize on users' social behavior in the website and does not answer the content industry's need to elicit payment from consumers. We suggest that both of these objectives can be achieved by acknowledging the fusion between content and community, making the social experience central to the content website's digital business strategy.
We use data from Last.fm, a site offering both music consumption and online community features. The basic use of Last.fm is free, and premium services are provided for a fixed monthly subscription fee. Although the premium services on Last.fm are aimed primarily at improving the content consumption experience, we find that willingness to pay for premium services is strongly associated with the level of community participation of the user.
Drawing from the literature on levels of participation in online communities, we show that consumers' willingness to pay increases as they climb the so-called "ladder of participation" on the website. Moreover, we find that willingness to pay is more strongly linked to community participation than to the volume of content consumption. We control for self-selection bias by using propensity score matching. We extend our results by estimating a hazard model to study the effect of community activity on the time between joining the website and the subscription decision. Our results suggest that firms whose digital business models remain viable in a world of "freemium" will be those that take a strategic rather than techno-centric view of social media, that integrate social media into the consumption and purchase experience rather than use it merely as a substitute for offline soft marketing. We provide new evidence of the importance of fusing social computing with content delivery and, in the process, lay a foundation for a broader strategic path for the digital content industry in an age of growing user participation.
374 citations
TL;DR: This paper presents a novel randomized experiment that tests the existence of causal peer influence in the general population -- one that did not involve subject recruitment for experimentation -- of a particular large-scale online social network, utilizing a unique social feature to exogenously induce adoption of a paid service amongst a group of randomly selected users.
Abstract: Demonstrating compelling causal evidence of the existence and strength of peer-to-peer influence has become the holy grail of modern research in online social networks. In these networks, it has been consistently demonstrated that user characteristics and behavior tend to cluster both in space and in time. There are multiple well-known rival mechanisms that compete to be the explanation for this observed clustering. These range from peer influence to homophily to other unobservable external stimuli. These multiple mechanisms lead to similar observational data, yet have vastly different policy implications. In this paper, we present a novel randomized experiment that tests the existence of causal peer influence in the general population-one that did not involve subject recruitment for experimentation-of a particular large-scale online social network. We utilize a unique social feature to exogenously induce adoption of a paid service among a group of randomly selected users, and in the process develop a clean exogenous randomization of treatment and control groups. A variety of nonparametric, semiparametric, and parametric approaches, ranging from resampling-based inference to ego-level random effects to logistic regression to survival models, yield close to identical, statistically and economically significant estimates of peer influence in the general population of a freemium social network. Our estimates show that peer influence causes more than a 60% increase in odds of buying the service due to the influence coming from an adopting friend. In addition, we find that users with a smaller number of friends experience stronger relative increase in the adoption likelihood due to influence from their peers as compared to the users with a larger number of friends. Our nonparametric resampling procedure-based estimates are helpful in situations of networked data that violate independence assumptions. We establish that peer influence is a powerful force in getting users from free to premium levels, a known challenge in freemium communities.
This paper was accepted by Sandra Slaughter, information systems.
373 citations
TL;DR: Firms whose digital business models remain viable in a world of "freemium" will be those that take a strategic rather than techno-centric view of social media, that integrate social media into the consumption and purchase experience rather than use it merely as a substitute for offline soft marketing.
Abstract: The content industry has been undergoing a tremendous transformation in the last two decades. We focus in this paper on recent changes in the form of social computing. Although the content industry has implemented social computing to a large extent, it has done so from a techno-centric approach in which social features are viewed as complementary rather than integral to content. This approach does not capitalize on users’ social behavior in the website and does not answer the content industry’s need to elicit payment from consumers. We suggest that both these objectives can be achieved by acknowledging the fusion between content and community, making the social experience central to the content website's digital business strategy. We use data from Last.fm, a site offering both music consumption and online community features. The basic use of Last.fm is free, and premium services are provided for a fixed monthly subscription fee. Although the premium services on Last.fm are mainly aimed at improving the content consumption experience, we find that willingness to pay for premium services is strongly associated with the level of community participation of the user. Drawing from the literature on levels of participation in online communities, we show that consumers’ willingness to pay increases as they climb the so-called ‘ladder of participation’ on the website. Moreover, we find that willingness to pay is more strongly linked to community participation than to the volume of content consumption. We control for self-selection bias by using propensity score matching. We extend our results by estimating a hazard model to study the effect of community activity on the time between joining the website and the subscription decision. Our results suggest that firms whose digital business models remain viable in a world of “freemium” will be those that take a strategic rather than techno-centric view of social media, that integrate social media into the consumption and purchase experience rather than using it merely as a substitute for offline soft marketing. We provide new evidence of the importance of fusing social computing with content delivery and, in the process, lay a foundation for a broader strategic path for the digital content industry in an age of growing user participation.
352 citations
TL;DR: Understanding of the freemium business model is extended to include a market characterized by simultaneous intramarket competition for both thefreemium and paid products and how such dynamics may influence sales of the paid products is demonstrated.
Abstract: This paper examines the effect of the freemium strategy on Google Play, an online marketplace for Android mobile applications. By analyzing a large panel data set consisting of 711 ranked mobile apps, we found that the freemium strategy is positively associated with increased sales of the paid mobile apps. Positive trial experience as represented by high review rating of the free version of a mobile app leads to higher sales of its paid version, whereas high visibility of the free version of a mobile app as represented by its product rank does not have a significant impact on the sales of its paid version. This finding suggests that although offering a free trial version is a viable way to improve the visibility of a mobile app, offering a quality free app is more important in boosting sales of the paid app. Moreover, we found that the impact of review rating is reduced when the free version is offered, or when the mobile app is a hedonic app, because consumers have the ability to experience the a...
275 citations
TL;DR: Investigation of purchase behavior for virtual goods in three free-to-play game environments supports both main hypotheses that enjoyment of the game reduces the willingness to buy virtual goods while at the same time it increases the willingness of players to play more of thegame.
268 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2021 | 26 |
| 2020 | 39 |
| 2019 | 38 |
| 2018 | 27 |
| 2017 | 38 |
| 2016 | 35 |