Overcoming the monetization challenge in freemium online games
| Date | 08 July 2019 |
| DOI | https://doi.org/10.1108/IMDS-08-2018-0350 |
| Pages | 1339-1356 |
| Published date | 08 July 2019 |
| Author | Ahmad Beltagui,Thomas Schmidt,Marina Candi,Deborah Lynn Roberts |
| Subject Matter | Information & knowledge management |
Overcoming the monetization
challenge in freemium
online games
Ahmad Beltagui
Department of Operations and Information Management,
Aston Business School, Birmingham, UK
Thomas Schmidt
Maersk Mc-Kinney Moller Institute,
University of Southern Denmark, Odense, Denmark
Marina Candi
Center for Research on Innovation and Entrepreneurship,
Reykjavik University, Reykjavik, Iceland and
Business School, University of Edinburgh, Edinburgh, UK, and
Deborah Lynn Roberts
The York Management School, University of York, York, UK
Abstract
Purpose –Online games based on a freemium business model face the monetization challenge. The purpose
of this paper is to examine how players’achievement orientation, social orientation and sense of community
contribute to willingness to pay (WtP).
Design/methodology/approach –A multi-method study of an online game community is used. Interviews
and participant observation are used to develop an understanding of social and achievement orientations
followed by the development of hypotheses that are tested using survey data.
Findings –The findingsindicate that a sense of community is positively related to WtP,whereas satisfaction
or dissatisfaction with the service provider is not. The authors examine the moderating role of players’
achievementorientation and socialorientation and find that whilea strongerconnection to the community may
encourage achievement-oriented players to pay, theopposite is indicated for socially oriented players.
Practical implications –Decision makers need to understand that not all players are potential payers;
while socially oriented users can help to maintain and grow the community, achievement-oriented players are
more likely to pay for the value they extract from the community.
Originality/value –While communities are held together by people with common interests, which
intuitively suggests that WtP increases with the strength of connection to the community, the authors find
this only applies in the case of players with an achievement orientation. For those with a social orientation,
WtP may actually decrease as their connection to the community increases. These perhaps counter-intuitive
findings constitute a novel contribution of value for both theory and practice.
Keywords Monetization, Mixed methods, Online games, Achievement orientation, Social orientation
Paper type Research paper
Introduction
In online communities, particularly online games, value is not created by businesses, but is
instead co-created in interactive, multi-directional exchanges in communities of users
(Kuppelwieser et al., 2013; Oestreicher-Singer and Zalmanson, 2013). Indeed, the service
Industrial Management & Data
Systems
Vol. 119 No. 6, 2019
pp. 1339-1356
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-08-2018-0350
Received 21 August 2018
Revised 27 February 2019
28 May 2019
Accepted 31 May 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
Part of the funding for this work has been provided from the European Union’s Seventh Framework
Programme for research, technological development and demonstration under Grant Agreements Nos
251383 and 324448. The second author was a full-time employee of the company studied at the time of
data collection. The paper was written after the end of this employment and the company had no
influence over the reporting.
1339
Monetization
challenge in
freemium
online games
providers’role is often simplyto provide the platform for such exchanges to take place. Some
users pay for online games, while others make non-monetary contributions. They provide
content, offer services and generate network effects by creating a community for others to
interact with. Service providers must therefore adapt to a power shift in users’favor. While
marketing research has focused on brand communities, where community loyalty and
willingnessto pay (WtP) are mutually reinforcing (Schau et al., 2009; Algesheimer et al.,2010) ,
the issue of why(some) people pay for online gamesremains challenging.Getting online game
players to both contribute to a healthy community and make sufficient monetary contributions
to sustain the service is referred to as the monetization challenge.
The monetization challenge is particularly germane against the backdrop of the ubiquity
of freemium business models, which offer free but restricted access to services with the
option to remove restrictions through payment of one-off fees or subscriptions (Anderson,
2009). Free access stimulates demand, even though only a small proportion of users
typically go from free to fee paying. Conversion rates of 10 percent are considered high
(Lovell, 2011), but nevertheless may generate insufficient revenue to sustain the service
provider. While increasing WtP in order to increase conversion rates is appealing, online
games are also faced with the challenge of creating a critical mass of ( free or paying) users.
Their interactions create network effects, without which an online game has less value (Lin
and Lu, 2011). Thus, the monetization challenge is twofold: critical mass and conversion. To
generate critical mass, service providers need to support a sufficiently motivated
community of users to contribute non-monetary value including content and participation
(Kuppelwieser et al., 2013; Anderl et al., 2016). To ensure conversion, they must ensure a
sufficient number of community members also feel motivated to make monetary
contributions (Pauwels and Weiss, 2008). In freemium online games, not all players are
payers, but both groups are essential to the survival of the community.
Participation in online games is motivated by achievement or social motives; either a
match between challenge and skills or by interdependence with other players (Huang et al.,
2017). Yet, little is known about how these motivations influence WtP and research in the
context of online games is limited (Hofacker et al., 2016).
By investigating the drivers of WtP in an online game based on a freemium model, we
highlight the combined effects of community and player type on WtP. This helps to
overcome gaps in the literature in relation to WtP in online game communities. This
research makes three important contributions to knowledge. First, while communities are
held together by people with common interests, which would suggest WtP increases with an
individual’s connection to community, we find evidence of this effect only for users with an
achievement orientation. For those with a social orientation, WtP may even decrease as their
connection to the community increases. Service providers must therefore use different
incentives to encourage monetary and non-monetary contributions from these different
categories of users. Second, we observe that the actions of the service provider have at best a
neutral effect on WtP. Users expect access to the community to be provided, but most of the
value in their experience stems from interactions with other users. Service providers should
therefore support these communities, while minimizing disruption to their experience.
Finally, a distinction is found between community membership and social orientation.
Achievement-oriented users are not necessarily anti-social, but their connection to fellow
community members may be viewed in terms of reciprocal exchanges rather than general
social capital. Our research clearly shows that player motivation, in combination with sense
of community, can be a crucial influence on WtP.
Theoretical background
We draw on theory related to online communities, games and player types, motivation and
WtP. A summary of literature that informs the research is presented in Table I.
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