Freemium Business Model in Gaming Industry. Analysis of Engagement Factors Affecting Monetization

Video gaming industry have rapidly changed over the last two decades. Only during the last 5 years the number of active gamers has grown from 1.99 billion to 2.69 billion worldwide. Increasing number of players, greater accessibility of the internet, higher competition and increasing development cost motivated game studios shift from premium distribution, which is based on selling a copies of the game, to mixed and freemium models. In freemium model, the core product is free, and game is monetized by running advertisement, in case of mobile games, and selling additional content through microtransactions. The main advantage of freemium model is predictable and stable revenue streams. But as far as freemium games are distributed at zero price, game studios faced a challenge on how to switch non-paying users to paying one. This research aims to answer the research question: “How engagement factors influence intention to pay for premium content in freemium games?”. This study examines how direct and social engagement factors affect users intention to pay in freemium games. Binary logistic regression is used for the purpose of analysis, measuring the likelihood of user being a paying player by applying 6 independent about users direct and social engagement activities in freemium online game. Both direct and social engagement factors were found as significant and positively affecting intention to pay for premium content.