On Top of The Game? The Double-Edged Sword of Incorporating Social Features into Freemium Products
65 Pages Posted: 7 May 2019 Last revised: 30 Aug 2021
Date Written: August 30, 2021
Freemium products rely on 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 the market 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 the market is constrained, network effects might fall short and users may feel they are missing out on key aspects of the product. We test this dynamic on a sample of 9,700 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; superstars; platform markets; installed base
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