Yep I think you are all right! Although I wasn’t talking about addictiveness at all when I mentioned the xxx business.
The title of this thread is “Why a paid app is a bad idea”, so I was thinking about freemium, in general.
The porn industry always seems to be in the forefront of internet marketing, which is why many have studied it seriously. Web video, free trials, membership sites and even HD streaming services are all rumored to have been adopted as an industry standard by the pornographic industry first.
We’re going through the freemium revolution, because companies are realizing that the long-term value of a customer is MUCH higher than the one-time value of a sale. Just like the porn industry realized back in the day.
But looking back at free trials, many other industries followed suit, some without emotional addictiveness or virality. For example, the software industry also ended up adopting that business model as a standard (although games probably did it first, in the early days of Id Software). But in the case of software, it wasn’t the addictiveness of a program but its usefulness what made people come back. And it was neither of those qualities that led to the sale. It was the smart segregation of what should be free and what should be paid.
Nowadays in Silicon Valley, most companies are going freemium and I believe the smart ones that will survive in the long term are those who intelligently decide what will be free and what will be paid.
Obviously if they give away everything they make no money, and if they make everything paid (and expensive), they will never get enough traction to position their brand as the leader of that space. But if they give away just enough, they become the leader with a huge client base that eventually pays.
A perfect example of this is Evernote, which had millions of free users, but their limits are set in such a way, that the CEO mentions a free-to-paid conversion of over half of their users, once they’ve been using the service for more than a year. It’s not because they become addicted to the software. Most of them probably need the right features, which are intelligently picked to be paid-only. But many of them don’t even need or use the paid features, they become paid users because they regularly use the software and want to support it, or they want the status and ego boost of being a “premium” member. But many would never have tried it if they had been charged up-front.
Back to games, the current revolution going on in the MMORPG space is incredibly interesting. One by one, all the big companies are switching over to freemium and noticing not just surge in new users that had never played the game, but also big spikes in revenue from microtransactions. They’re all scared at first, but across the board, they’re all saying that it’s turned out to be MUCH more profitable to charge for microtransactions (sometimes in addition to the premium monthly memberships), than to close the game to paid-only.
But more importantly to this conversation, a big new idea in game design based on this new business model is the phrase: “Don’t put a ceiling on the whales”.
Whales are what they call the big spenders of a game. The few people that buy SO much that they make the bulk of the revenue. In the MMO space, the key here is to not give them a monthly subscription that will give them access to EVERYTHING, or even worse, a one-time payment that gives away everything!! This is a deadly sin to companies like Zynga and Playdom.
What they advocate is to let the player decide how much they want to pay you, or as they like to say it: “how much love they want to give you”. So through consumable microtransactions, players can choose to spend as much money as they want, instead of just a few bucks per month for a monthly membership. These players will generate tens, hundreds and even thousands of dollars every month if we let them (Zynga’s numbers, not mine!).
But in the case of apps, if we just give them a one-time exit, boom, they’re gone for $4 or whatever you charge. That’s why traditional paid apps are a bad idea in my opinion. Those users who pay are whales, and we’re just sending them off forever for a one-time small spike. But their lifetime value was MUCH higher across many games, whether it’s through ads or microtransactions or both. What we need is to give them the option of “giving us as much love ($$$) as they want”, AND to make sure we can keep notifying them in an attention-grabbing way of new games!
So my advice would be: If you want to offer them an ad-less experience, get their email address. Give them points in the game or whatever, but don’t let them off the hook for a measly $3, because those are whales who will probably spend dozens (if not hundreds) of dollars on other games of yours, especially if you offer micropayments.
