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The Advertising Effect of Free - Do Free Basic Versions Promote Premium Versions within the Freemium Business Model of Music Services?

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  • Wagner, Thomas M.
  • Benlian, Alexander
  • Hess, Thomas

Abstract

Freemium seems a promising solution for content providers to earn money in times of the free mentality of Web 2.0 users. Freemium services can be used both for free or with a paid subscription to obtain premium content. Nevertheless, freemium's success is limited. Especially Music as a Service (MaaS) providers, that provide music via streaming over the internet as a service, still make no profits, because earnings from advertisements and premium users are not sufficient to finance the free basic version of music listening. However, this free basic version is necessary to convert non-paying users into paying ones. This study tests whether the basic, free version of a freemium service is recognized as advertisement for the premium version and could therefore lead to conversion. Using a structural equation model based on the Dual Mediation Hypothesis, we developed a survey with 71 participants and found that there is no advertising effect.

Suggested Citation

  • Wagner, Thomas M. & Benlian, Alexander & Hess, Thomas, 2013. "The Advertising Effect of Free - Do Free Basic Versions Promote Premium Versions within the Freemium Business Model of Music Services?," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 66723, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:66723
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/66723/
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    Cited by:

    1. Frago Kourandi & Jan Krämer & Tommaso Valletti, 2015. "Net Neutrality, Exclusivity Contracts, and Internet Fragmentation," Information Systems Research, INFORMS, vol. 26(2), pages 320-338, June.
    2. Vidyahwati Tenrisanna & Mohammad Mafizur Rahman & Rasheda Khanam, 2016. "Factors Affecting Consumers' Willingness to Pay for Imported Offal in Indonesia: A Case Study for Makassar City," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 15(2), pages 145-159, December.
    3. Daniel Veit & Eric Clemons & Alexander Benlian & Peter Buxmann & Thomas Hess & Dennis Kundisch & Jan Leimeister & Peter Loos & Martin Spann, 2014. "Business Models," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 6(1), pages 45-53, February.
    4. Angela Aerry Choi & Daegon Cho & Dobin Yim & Jae Yun Moon & Wonseok Oh, 2019. "When Seeing Helps Believing: The Interactive Effects of Previews and Reviews on E-Book Purchases," Information Systems Research, INFORMS, vol. 30(4), pages 1164-1183, December.

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