I wrote a post a while ago explaining how the freemium business model for websites works. As part of this I referred to farmville, a social game on facebook that charges for extras.
However there has been a recent exploration of another side of freemium on techcrunch.
“In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won’t pay cash, a wide variety of “offers” are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it’s also bad for legitimate advertisers.
The reason why I call this an ecosystem is that it’s a self-reinforcing downward cycle. Users are tricked into these lead gen scams. The games get paid, and they plow that money back into Facebook and MySpace in advertising, getting more users. Who are then monetized via lead gen scams. That money is then plowed back into Facebook and MySpace in advertising to get more users…”
Of course there is a trade-off: every social application has to determine whether to betray the loyalty of users and potential users by cashing them in like this. However, it seems from the techcrunch write-up that the levels of income that can be generated by moving over to the dark side is so high any profit-making enterprise would be tempted. Thus, it will either be up to the might of the social media massive to stand up against the gamers they feel are exploiting them, or up to government regulation. Which brings us back to questions of internet sovereignty and borders and the need to answer questions like ‘Who right now can regulate and enforce a law which affects web users in 90 countries?’
In the meantime, those trying to monetise in a freemium sort of way need to consider the following and act accordingly:
“There’s an easy way to determine if something is a scam or not. For any particular offer, ask yourself if anyone would buy the product or service if the terms were clearly spelled out for them, and they weren’t being bribed with in-game currency. The answer for many of these is a resounding “no.” ”