In Tuesday's IPO filing, Anglo-Swedish game developer King Digital Entertainment offered a rare glimpse into the secrets of the so-called freemium business model for apps.
King, renowed for its "Candy Crush Saga" puzzle game, has helped pioneer the world of so-called freemium apps, where the software costs nothing to download, but is packed with features that users can pay to access. Often, these in-game "power-ups" help to speed up the game by reduce waiting times.
In Candy Crush, for instance, gamers are given a limited number of tries to complete a level. If they fail, they can either wait a few minutes before trying again, plead to pals on Facebook to help them out (thereby helping King to promote the title), or pay a small sum of real world cash for an extra package of attempts.
Supercell Oy, another freemium game developer, encourages players of its "Clash of Clans" game to purchase gems, which are used to boost progression in the game. In Clash of Clans, players are given a sizable number of free gems as they begin progressing, but these gems eventually run out, leaving players with frustrating waiting times as they strive to rank up.
While a vast majority of those downloading and playing freemium games never end up paying for in-game boosters, the benefit of the freemium model is that there's no cap on the maximum amount a player can end up spending.