UCL Discovery
UCL home » Library Services » Electronic resources » UCL Discovery

Creating and capturing value from freemium business models: A demand‐side perspective

Rietveld, J; (2018) Creating and capturing value from freemium business models: A demand‐side perspective. Strategic Entrepreneurship Journal , 12 (2) pp. 171-193. 10.1002/sej.1279. Green open access

[thumbnail of Rietveld_Creating and capturing value from freemium business models. A demand-side perspective_AAM.pdf]
Preview
Text
Rietveld_Creating and capturing value from freemium business models. A demand-side perspective_AAM.pdf - Accepted Version

Download (1MB) | Preview

Abstract

RESEARCH SUMMARY: While it has long been recognized that the business model can be a source of performance heterogeneity, less is known about how the business model affects consumers' perceptions about a firm's products and services. By taking a demand‐side perspective, I argue that business models create and capture value when the elements that compose a business model improve how consumers perceive a firm's products and better enable heterogeneous consumers to act on their willingness‐to‐pay. I develop theory on how the freemium business model competes with the premium business model and test hypotheses in the market for digital PC games. Results show that freemium games are played less and generate less revenues and that greater variety in games' menus of paid items is associated with higher revenues. MANAGERIAL SUMMORY: Freemium business models are increasingly prevalent in the digital economy, yet very little is known about how freemium affects consumers' perceptions of value and their willingness‐to‐pay. In this article, I study how the freemium business model competes with the premium business model in the market for digital PC games. Results show that freemium games are played less and generate less revenues than premium games and that greater variety in games' menus of paid items is associated with higher revenues. This implies that in order to achieve competitive parity with firms operating the premium business model, firms operating the freemium business model need to create more value (e.g., through improved product quality, income from advertisements, or unlocking network externalities) or operate at lower costs.

Type: Article
Title: Creating and capturing value from freemium business models: A demand‐side perspective
Open access status: An open access version is available from UCL Discovery
DOI: 10.1002/sej.1279
Publisher version: https://doi.org/10.1002/sej.1279
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: business models, demand‐side view, freemium, value creation, value capture, video games
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI: https://discovery.ucl.ac.uk/id/eprint/10056200
Downloads since deposit
863Downloads
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item