If you’re the proud owner of a smartphone or tablet of any kind, there’s a good chance that you’ve installed an app or two at some point.

Some of these may be for business, but it’s likely a good few of them are for fun. As you’ll well know, interactive gaming comes in many different forms and these days the app is one of the primary ones. But not everyone wants to gamble, or at least they don’t want to feel like they’re gambling.

Games developers seem to have created a nifty way around this feeling of reluctance: rather than having gamers pay for the game once and play as much as they like, many games are now offered completely free but with in-app purchases that help them progress and/or win.

Such titles are known as ‘freemium’ games and they’re causing quite the furore in certain circles, especially in the online gaming world. So let’s take some time to look at the freemium debate in more detail and learn how this new business model could easily take the place of casinos, with profits that equal and – in some cases – exceed that of traditional gaming media.

The early days of freemium gaming

Believe it or not, the business model of freemium gaming actually dates back all the way to the 1980s, with PC games that were provided for free in a feature limited form, with players then encouraged to purchase the full version if they enjoyed the title.

Some people at the time referred to this business practice as ‘crippleware’ due to the way in which key features were often locked from users until they cough up sufficient cash. Even classic titles such as Doom and Quake, early PC first person video games, were distributed as shareware for free.

History is a testament to the effectiveness of this business model, particularly within the context of late 80s and early 90s PC games, but the freemium business model we’re seeing in today’s online world is a very different one – let’s find out how.

The introduction of the internet

With the web came much opportunity for all-new business models, including freemium; however, it was surprisingly rarely used between the late 1990s and mid-to-late 2000s. Business decision-makers and games developers instead focused on other channels, partly due to low internet speeds thanks to dial-up modems.

However, with the introduction of broadband to the masses, more fluid online gaming became a possibility. Broadband took the web to an all-new level, with, as money.co.uk point out, “even the slowest broadband speeds [being] lightning quick compared to old dial up connections”. Whether DSL or cable, broadband offered a much faster connection speed and enabled better latency for online video games.

This is all part of a plan to expand broadband speeds exponentially by 2015. Soon after this came social networks such as Facebook, and games developers quickly saw a chance for the resurrection of the freemium model. In 2009, Farmville took the world by storm, and is seen by some as the first truly freemium game of the post-2000 era.

The freemium business model in the new millennium

With smartphones and tablets being so ubiquitous these days, it’s perhaps not surprising that developers are always finding new ways to monetise their apps. Prior to the release of Apple’s iOS 3.0 in October 2009, such developers were limited to two options: free or paid. There was no in between. Then, with the release of iOS 3.0, in-app purchases were made a possibility – and everything changed.

These allowed developers to provide a title for free, then encourage users to ‘unlock’ features or buy in-game currency within the app itself. In this way, a whole new variant of the freemium business model was born and it’s one that is thriving to this day. Titles such as Candy Crush Saga, Clash of Clans and even games based on popular franchises like The Simpsons: Tapped Out, are all prime examples of freemium titles.

Common mechanics include the ability to buy in-game currency to unlock features more quickly, or to skip waiting periods which would otherwise impede a user’s progress.

The two flavours of freemium

There seems to be two varieties of the freemium model that are seen most regularly within smart device apps and they can broadly be categorised into ‘pay to win’ and ‘pay to advance’. In the former (pay to win), users can actually get a winning advantage by putting down extra money, giving them a vast edge on all players who choose not to pay any money. The latter, on the other hand (pay to advance) works by allowing users to unlock features early that they would have unlocked anyway by playing.

The idea is that time-poor individuals will still be able to compete in games against those who have much more free time to put in. The general consensus is that ‘pay to advance’ is a fairer implementation of the freemium model and can be seen being employed by titles such as Battlefield 3 (in which case the base game is also a paid title).

What is the freemium debate?

The phrase ‘freemium debate’ was coined in recent years to exemplify a subset of the gaming community (and the wider world) that believe that the freemium business model is exploitative and not conducive to a satisfying gaming experience for players – particularly in the case of ‘pay to win’.

One key question here, especially for those in the online gaming community, is, what is the difference between the freemium business model and the more widely accepted online gaming methods – such as online poker, roulette and other casino-style games?

In both cases, users are putting down cash in an effort to ‘win’ in one way or another. Perhaps the key differentiator is that in freemium titles, even when a player wins, there is no tangible prize or winnings of any kind besides bragging rights. Maybe, then, this is the core conceit of the freemium debate?

What do you think of this business practice? Is it the future or a step into a darker, more exploitative world?