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An Analysis of the Business Structures and Performance of Traditional vs. Freemium Applications

By Daztar Pagdiwala

Abstract

This thesis will examine the rationale and financial success of “freemium” applications versus traditional applications. I define what the “freemium” model is, and how it compares to the traditional (premium) and “free trial” models. In addition, I discuss the value proposition of the business structure, and how it is fully dependent on the consumer’s ability to perceive an increase in value through the purchase of additional features. I also analyze the major positive and negative aspects of the “freemium structure. Overall trends that I note in the paper include a general shift towards “freemium” and “subscription” based products; within the game subsegment, specifically, we see corporations succeeding with the “freemium” model. In addition, one emerging trend prevalent as of recent times is companies failing to offer a value proposition that is satisfying enough to its consumers. This thesis also includes several financial analyses; notably, why the popular “freemium” battle royale game Fortnite outperforms its paid competitor PlayerUnknown\u27s Battlegrounds (PUBG). In addition, I evaluate companies which have had successful or unsuccessful experiences with the “freemium” model, whether from switching models or initially adopting it. MailChimp switched to a “freemium” model and found its paying customer base grow significantly, whereas Ning struggled with implementing the “freemium” model and adopted a traditional model. Some metrics I analyze include changes in the composition and raw amount of revenue and customer base, as well as the reasons why the “freemium” model proved to be successful or not for a business. Ultimately, if implemented correctly, the “freemium” business model might just be the disruption a company needs to revitalize its performance

Topics: Applications, Finance, Mobile Apps, Freemium, Business Analytics, E-Commerce, Finance and Financial Management
Publisher: OpenCommons@UConn
Year: 2019
OAI identifier: oai:opencommons.uconn.edu:srhonors_theses-1722

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