iPhone app price drops grow revenue an average of 159% in 7 days
Price drops on Apple's App Store can be an effective tool used to gain interest and boost revenue in the short term, a new study has found.
In its latest report, mobile app analytics firm Distimo took a look at the effect of price changes on mobile software. Their data found that a total of 850 unique iPhone applications, and 930 iPad applications, changed their price at least once in the month of December.
The data collected by Distimo found that price changes have a much greater effect on iPhone software than iPad. For example, downloads of iPhone apps increased by 1,665 percent five days after a price cut, while iPad software downloads grew by 871 percent.
Distimo also found that price cuts resulted in revenue growth rates continuing to grow the longer than the application was on sale. For example, revenue for an iPhone app increased 137 percent five days after a price drop, and 159 percent a full week after the discount was enacted.
"There is a two-fold explanation for this lagged revenue growth effect: either an increase in income from one-off fees or an increase in income generated by in-app purchases," they explained.
Going in the opposite direction and increasing the price caused cumulative downloads to drop by 46 percent over five days on the iPhone, and 57 percent after five days on the iPad.
In all, the data shows that customers are more sensitive to price changes on the iPhone than they are on the iPad. Distimo came to the conclusion that price drops ? particularly ones sustained for at least a week ??are a smart play for developers looking to increase downloads and revenue.
In its latest report, mobile app analytics firm Distimo took a look at the effect of price changes on mobile software. Their data found that a total of 850 unique iPhone applications, and 930 iPad applications, changed their price at least once in the month of December.
The data collected by Distimo found that price changes have a much greater effect on iPhone software than iPad. For example, downloads of iPhone apps increased by 1,665 percent five days after a price cut, while iPad software downloads grew by 871 percent.
Distimo also found that price cuts resulted in revenue growth rates continuing to grow the longer than the application was on sale. For example, revenue for an iPhone app increased 137 percent five days after a price drop, and 159 percent a full week after the discount was enacted.
"There is a two-fold explanation for this lagged revenue growth effect: either an increase in income from one-off fees or an increase in income generated by in-app purchases," they explained.
Going in the opposite direction and increasing the price caused cumulative downloads to drop by 46 percent over five days on the iPhone, and 57 percent after five days on the iPad.
In all, the data shows that customers are more sensitive to price changes on the iPhone than they are on the iPad. Distimo came to the conclusion that price drops ? particularly ones sustained for at least a week ??are a smart play for developers looking to increase downloads and revenue.
Comments
That's incredible. I wouldn't have guessed it was by that much.
[IMG ALT=""]http://forums.appleinsider.com/content/type/61/id/19979/width/350/height/700[/IMG]
If there's an app or game that I want, and it looks good, it makes no difference to me if it's 99 cents or $1.99 or $2.99 or whatever. The only apps I will specifically wait for price drops on are more expensive apps, like when something drops from $50 to $25 for a short period of time. That will definitely influence my decision. An app going from $1.99 to 99 cents will not. If it wasn't attractive at $1.99, 99 cents won't make it any more attractive.
Not mentioned here is the fact that there are many sites and apps dedicated to tracking price drops. The additional attention these apps receive has to be a contributing factor. I get a daily e-mail on app price drops to watch for apps that change to free, but I do find myself once in awhile purchasing an app that comes up as a price drop because I am now aware of its existence.
Quote:
Originally Posted by AppleInsider
...
In its latest report, mobile app analytics firm Distimo took a look at the effect of price changes on mobile software. Their data found that a total of 850 unique iPhone applications, and 930 iPad applications, changed their price at least once in the month of December.
The data collected by Distimo found that price changes have a much greater effect on iPhone software than iPad. For example, downloads of iPhone apps increased by 1,665 percent five days after a price cut, while iPad software downloads grew by 871 percent.
Distimo also found that price cuts resulted in revenue growth rates continuing to grow the longer than the application was on sale. For example, revenue for an iPhone app increased 137 percent five days after a price drop, and 159 percent a full week after the discount was enacted.
I agree and accept that a price cut would and should increase sales.
I don't understand the two sets of numbers though. 1,665 and 871 percent versus 137 and 159 percent.
Quote:
Originally Posted by Smiles77
That's incredible. I wouldn't have guessed it was by that much.
Mine costs zero. The demand's infinite....
I added features to my app and then raised the price. I'm selling just as much as I did before and making more money. But, I'll have to see how it goes. The app was just released so I might be seeing a bump due to that.
What's tragic is how good apps which take freelancers a lot of time to develop can barely sell for the price of a cheap cup of coffee. It's also a shame the market gets flooded with apps built off of java based build for all device sdk's. Not difficult to see when you've downloaded one of those. The app market will soon be filled with apps that have drag and drop elements that someone built using a web browser. I really wish Apple would limit apps coded using to Objective C or C.
Originally Posted by Brasco
I really wish Apple would limit apps coded using to Objective C or C.
I agree, for the most part. I'd love to see them block Flash again to prevent people from doing zero work and just porting Flash games to iOS (and even OS X…).
The point here was not that they sell more. They make a lot more money at the lower price. That's not at all obvious.
deleted
There are over 500 million iOS devices out there. If you make an app that is attractive to 1% of them at $1, your revenue is $5 million. That's not tragic. That's the power of a mass market with almost no cost to make copies of the product. You're being paid by the market, not by the individual.
Do you know what it takes to get enough exposure to capture that 1%. We have at least 6 apps currently out there. Just on the free side we are fortunate to get 100 downloads a day. There are a lot of crap apps out there not getting any downloads (I had one and pulled it) which are taking up app space for the apps that offer real value. The point is, with so many free crap apps, how is a user going to ever get to your app which offers value at .99. The supply far out weighs the demand.
There is a huge market opening up is China as well. I released an app in China selling 100's of free apps per day. Set it to .99 and DOA. I wish apple would setup iAds in the China market so we could start making money there as well. From my conversations with fellow students from China, the Chinese culture does not believe software is something people should pay for, it should be free. I'm fine with that, just give me a profitable ad channel to take advantage of it. We tried AdMob but they don't pay for ****.
Quote:
Originally Posted by lkrupp
No, no, no, no... Any back room analyst worth their salt can interpret this correctly. Lower app prices means a precipitous drop in iOS device sales, hence the need to slash prices. Apple is doomed!
zzz
Originally Posted by stelligent
zzz
I just had Zither Zather Zuzz flashbacks. Don't do that!
That's what happens when something sells more, duh
Damn you, Apple. You never discount your stuff more than 10%, but you are driving AppStore prices to 10%, so 99% of iOS developers work for peanuts.
I'm not kidding. My app is in AppStore since 2008. I've witnessed several rule changes in AppStore that helped to drive prices to $1.
Here's a interesting article I recently read.
http://www.nytimes.com/2012/11/18/business/as-boom-lures-app-creators-tough-part-is-making-a-living.html?pagewanted=all&_r=0