On Top of The Game? The Double-Edged Sword of Incorporating Social Features into Freemium Products
Strategic Management Journal, 43(6): 1182-1207
40 Pages Posted: 7 May 2019 Last revised: 6 May 2022
Date Written: November 12, 2021
Freemium products require widespread diffusion for their success. One way to do this is by incorporating social features (e.g., multiplayer functionality, virtual collaboration, ridesharing), which can generate network effects and result in a product becoming a superstar. However, social features can be a double-edged sword: When demand potential for freemium products is large, social features can significantly boost a product’s appeal resulting in more adoption, more usage, and more in-app purchases; but when demand potential is constrained, network effects might fall short and users may feel they are missing out on key aspects of the product. We test this on a sample of 9,700 digital PC games on Steam. Findings contribute to our understanding of network effects, freemium strategies, and superstar products in platform markets.
Keywords: social features; freemium; network effects; platform markets; product strategy; business models
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