A freemium app or game is a business model where the application is given away for free, but the customer can spend money on various enhancements to the game. It has become a popular model on both smartphones and tablets like the iPad as well as becoming a prevailing feature among social games. In recent years, the freemium model has also invaded massively multiplayer online role-playing games (MMORPGs), with games like Everquest 2 and Lord of the Rings Online going free-to-play under the freemium model.
Freemium is a combination of the words "free" and "premium".
How Does Freemium Work?
The basic freemium application gives away its core functionality for free and offers upgrades to add certain features. In its most simple form, this is like combining the "lite" version of an app with the premium version, which for iPad apps, can be unlocked with an in-app purchase.
A free app will be downloaded much more than a paid app, and the freemium model works based on the principle that once you have allowed the customer to look at your app and find it useful (or, in terms of a freemium game, finding it fun and engaging), the customer will be willing to spend money within the game.
Freemium games on the app store include Kard Combat, which allows you to purchase additional game contact through in-app purchases and follows more the "lite" version verses "premium" version model, and Pocket Legends, which has more of a classic freemium model, allowing you full access to the game for free and offering in-game money for a real-world price.