Apps Can Make More Money While on Sale

January 27, 2012

distimo-app-sale-effects.jpgThe benefit of increased downloads outweighs the loss in price when an application is put on sale in the Apple App Store for iPad, the Apple App Store for iPhone, and the Google Android Market, according to a report released in January 2012 by Distimo. The report, which measured the revenue effects per day for the top 100 top grossing applications in any category that cut their price in the US, found that on the first day of the sale, the average revenue per app increased by 41% in the Apple App Store for iPhone, while the revenue during the whole sale (maximum of 15 days) rose 22%. The first day effect was largest in the Apple App Store for iPad (52%), while the increase in revenue during the sale period was highest in the Google Android Market, at an average of 29%.

Pricing Strategy Matters, Though

distimo-app-pricing-strategy.jpgThe report notes that not all developers enjoyed higher revenue during the sale period: 44% of the iPhone applications that were on sale lost revenue, including 23% that saw a decline in revenues of more than 20%. According to Distimo insight, this can be partly explained by the chosen pricing strategy, with the tipping point happening when the price was cut in half or the application was offered in tier 1 ($0.99) or tier 2 ($1.99).

Looking at the Apple App Store for iPad, Distimo found that as the average percentage price cut rose, the proportion of apps losing revenue fell, while the proportion of apps making money increased. For example, when the price cut increased from at least 40% to at least 80%, the proportion of applications with more than 20% loss in revenue dropped from roughly one-third to only 19%, while the proportion of applications with more than 50% increase in revenue rose from 11% to 30%.

The data used are the averages over all days that each application was on sale.

According to a January 2012 IHS report, though, the best way to make money on apps might be to offer them for free, and generate revenue from in-app purchases instead: IHS predicts that revenue from in-app purchases will grow to overtake paid downloads and account for 64% of total market revenue in 2015, up from 39% in 2011.

Featured Apps Get Rankings Bump

Data from Distimo’s report indicates that an app being featured can have a significant effect on its rankings. Among apps already ranked among the top 100 most popular, the average gain in the first 3 days after being featured was highest in Google Android Market (42 ranks), followed by Apple App Store for iPad (27 ranks), and Apple App Store for iPhone (15 ranks). In the Google Android Market, more than one-quarter of the apps rose 50 ranks or more, compared to only 6% that lost ranks. In the Apple App Store for iPad, a plurality of featured apps (35%) gained over 25 ranks, although in the Apple App Store for iPhone, one-third did not gain in the first 3 days of being featured.

Rankings Hold Over Time

The rankings boosts held during the entire period (7 days) of the app being featured, with the gains relatively equal to the 3 day average in both Apple stores, but even higher in the Android market (65 ranks). In fact, being featured had a positive effect on the performance of the app in the long run, too: on average the gains in the 5 days after being featured were 145% in the Apple App Store for iPad, 75% in the Apple App Store for iPhone, and 828% in the Google Android Market. The report defines a rank change from 3 to 2 as an increase of 50%, and a rank change from 50 to 25 as an increase of 100%.

About the Data: The Distimo data covers the 3 app stores during the period of October-December, 2011.

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