Freemium is an amalgamation of the words “free” and “premium” that refers to services, software programs or mobile apps that are offered to users free of charge, but typically with limited functionality, advertiser support or additional features that are only available for a premium charge. The freemium software business model originated with shareware software, where users are able to download software and try it free of charge but only for a limited time or with a restricted feature-set.
The freemium software model has become extremely popular recently with the debut of freemium apps and in-app purchases in the Apple App Store following the release of iOS 3.0. Freemium mobile apps such as Temple Run and Dragonvale are available for download on iOS-powered devices like the iPad and iPhone without charge, but users typically have the option to pay for additional features like power-ups, virtual money, restricted levels, special characters, boosts, etc. via in-app purchases.
Freemium apps now gross more than paid apps in the Apple App Store, with estimates of more than 65 percent of all revenue generated in the App Store from in-app purchases for freemium apps.