ABSTRACT This thesis paper presents a detailed assessment of microtransactions and its role amongst online business models in the gaming industry. In order to shed clarity on this type of model, a brief history is provided, the fundamental elements are explained, and a minor case study on a few companies that have yielded exceptional profit due to this business strategy is included. Two major topics that are subject to analysis include the effects that microtransactions has on customer acquisition and its effects on revenue stream. As this type of business model appeals to customer segments of different niche types, it has resulted in the growth and sales of gaming companies by a high margin. The different types of target demographics are explained and the appeal that microtransactions provide to each group is covered. I provide relevant arguments to corroborate the concept that microtransactions are the new business model of choice for game developers that strive to remain competitive. Furthermore, I conduct an analysis on the Internet as the new universal marketplace for consumers, rendering physical copies obsolete in favor of digital content. Finally, this thesis shares insight on the current market trends as well as the potential contribution of microtransactions to the future sustainability of the gaming industry as a whole.