The impact of app discounts and the impact of being a featured app Distimo Publication January 2012

By Gert Jan Spriensma, Analyst at Distimo

Apple App Store for iPad

IPAD

Apple App Store for iPhone

IPHONE

Google Android Market

Distimo was founded to solve the challenges created by a widely fragmented app store marketplace filled with equally fragmented information and statistics. Distimo was launched shortly after the introduction of the first app store. App stores have clearly shown since that time that they are the way forward for content distribution. The app store model offers an enormous opportunity for developers to get their content out and dramatically improves content discovery by consumers. However, the mobile market has long been characterized by fragmentation, which is also displayed in the wide range of mobile application stores that were launched from 2009 on. Distimo is a privately held company based in Utrecht, The Netherlands. Learn more: www.distimo.com

Distimo 2012, some rights reserved

Distimo Publication - January 2012

NEW AND NOTEWORTHY

This report gives an overview of the effects when an application is featured in the Apple App Store for iPhone, Apple App Store for iPad and Google Android Market. Moreover, this report shows the effects that occur when applications are put on sale. We conclude with data about the average prices of the highest grossing applications and an overview of the types of applications that generate the most revenue. All data covers the Apple App Store for iPhone, Apple App Store for iPad and Google Android Market during the period October December 2011 in the United States, unless otherwise noted. The major findings are: One of the ways publishers try to attract attention to an application is to put the app on sale. The average revenue rose by 41% in the Apple App Store for iPhone when looking at those applications that were already among the 100 highest grossing applications in any category, on the first day of the sale. Moreover, the revenue during the whole sale increased by 22%. In the Apple App Store for iPad those figures were +52% and +19%, respectively. In the Google Android Market on the first day the revenue increased by 7%, and during the whole sale increased by 29%. 30% to 50% of the applications on sale experienced a decrease in revenue even though on average the revenue increased in all three stores for the total group of applications on sale. Our research found that it is important to offer a significant price reduction to actually earn more revenue when putting an application on sale. In general, we noticed that the optimum sales occurred when the price was cut in half or the application was offered in tier 1 ($0.99) or tier 2 ($1.99). Another way to attract attention is by getting featured in one of the app stores. When looking at those applications that were already ranked among the top 100 most popular applications, the average gain in the first three days after getting 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). Looking at the whole period these applications were featured (seven days), the rank gains were more or less equal to the three days average in both Apple stores, but were even higher in the Google Android Market (+65 ranks). There were also significant effects after an application was featured. In the five days after the featured period ended, the gain was still +145% in the Apple App Store for iPad, +75% in the Apple App Store for iPhone, and +828% in the Google Android Market. +828% exemplifies a rank change from 8 to 1 or 100 to 12 in the Google Android Market.

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Distimo Publication - January 2012

INTRODUCTION
Being featured by one of the top app stores means more visibility for the developer of the app and more downloads. Developers are able to see when they are featured to explain unexpected spikes in the download volume using Distimo Monitor. Many developers aim to be featured in one of the app stores, however the mechanism behind this is largely unknown. Many developers would like to know the gains before putting a lot of effort into the process. Therefore, the question To what extent does being featured increase downloads? is highly relevant. There are several featured categories in the Apple App Store for both iPad and iPhone, but in this research we looked only at New and Noteworthy and Staff favorites. Another prominent featured category, Whats Hot, is based on what is already popular and thus, disregarded. The featured category, Staff Picks in the Google Android Market is used to analyze the effects of being featured. The category, Editors Choice is not updated regularly. In fact, most applications listed in that featured category have been there since at least August 2011, and therefore this category is not used for this analysis.

EFFECTS OF BEING FEATURED

The figure below shows the average gain during the first three days after an application is featured, and the data shows the effects are significant. In the Apple App Store for iPhone the average jump in ranks of applications that have been featured in Q4 in the Apple App Store for iPhone was +15. Of course, some applications gained significantly more, while others barely see any effect from being featured. The applications that were featured in Q4, but were not among the top 100 most popular applications in a category before being featured are not taken into account, as it was not possible to determine the gain in ranks.

The same trend can be observed looking at the Apple App Store for iPad and the Google Android Market. In fact, the gains of being featured there are much higher. In the Apple App Store for iPad the gain was +27, while in the Google Android Market the direct effect of being featured in Staff Picks was a gain of +42. The table below shows the proportions of applications that gained more than 50 ranks, 25 ranks, lost ranks, or lost more than 25 ranks, and thus did not profit from being featured.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

In the Apple App Store for iPhone almost one-third of the applications that have been featured over the past quarter did not gain in the first three days after being featured. While this figure is much lower for the other two stores, it is clear that getting featured not necessarily implies more downloads. Not only the first few days are relevant, given that applications in general, are featured for seven days in all three app stores. During all seven days that each application is featured, the average gain compared to the last non-featured day, is +65 in the Google Android Market, +15 in the Apple App Store for iPhone and +28 in the Apple App Store for iPad. These rank differences may seem spectacular, but a rank jump from 10 to 5 means a substantial uptake in downloads, while a rank jump from 50 to 45 is significantly less beneficial. Therefore, in the graph below the relative rank changes are depicted. A rank change from three to two is presented as an increase of 50%, while the rank change from 50 to 25 equals an increase of 100%. All figures shown are seven day averages, e.g., on a particular day in the featured period the difference can be larger. More detailed information about rank changes can be found in our monthly featured publication.

Per the above graph, approximately 50% of the applications that have been featured in the Google Android Market experienced an increase of more than 100%, while more than one-third of the featured applications in the Apple App Store for iPad gained more than 200%. Ranks in the Apple App Store for iPad increased by 252%, in the Google Android Market by 172% and in the Apple App Store for iPhone by 137% on average over the seven-day period.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

Finally, what is interesting is what the effects are after the featured period ends. We chose to use the average of the next five days, and found that being featured has a positive effect on the performance in the long run as well. On average the gains in the five days after being featured were still +145%, +75% and +828% in the Apple App Store for iPad, Apple App Store for iPhone and the Google Android Market, respectively. Please note that in this analysis we only used those applications that were already among the 100 most popular applications in any category before getting featured. Looking at the store differences, we see that being featured in the Google Android Market has significantly more effects on the ranking than in the other two stores. Even more interesting are the long-term effects. In the Apple App Stores the effect of being featured fades, but in the Google Android Market the average gain in ranks increases to 828%! This can partly be explained by the number of days taken into account to determine the ranking, e.g., the Apple ranking algorithm takes less days into account compared to Googles. However, this is only a part of the story; getting featured in Google is very beneficial for publishers!

EFFECTS OF PUTTING YOUR APP ON SALE

Although the stores have a monopoly on the shelf space in the app store, there is a way to get your own app in the picture without ad campaigns. Applications that are on sale tend to get a lot more attention and downloads than when they are not on sale. However, this comes at a cost as well; you have to sell your application for less. On the other hand, when the surge in downloads makes up for the loss in price, an application can also make more money while on sale. And observed in the figure below, thats exactly what happens in all three stores. Based on the list of the 100 top grossing applications in any category it is possible to measure the revenue effects per day for applications that cut their price in the United States. On the first day of the sale, the average revenue increased by +41% in the Apple App Store for iPhone. Moreover, the revenue during the whole sale (we looked at a maximum of 15 days) was up by +22%. So, on average, putting an app on sale pays-off directly in the Apple App Store for iPhone. This trend can also be observed in the other two stores. The first day effect is larger in the Apple App Store for iPad (+52%), and the increase in revenue during the sale in the Google Android Market was the highest at +29% on average.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

Not all developers enjoyed higher revenue during the sale period, however. When looking closer at these numbers; 44% of the iPhone applications that have been on sale lost revenue during the sale, and 23% saw a decline in revenue by more than 20%. This can be partly explained by the chosen strategy. For example, offering a discount of one dollar on an application that normally costs $7.99, lowers the revenue, whereas offering a discount of three dollars on average increased the revenue by 131%. In general, we noticed that the tipping point happened when the price was cut in half or the application was offered in tier 1 ($0.99) or tier 2 ($1.99). The graph below provides valuable insights to support the statement stated within this months report. The graph utilizes the data from the table above, but now with a third dimension the price cut. We looked at the cases where the normal listing was cut by at least 40%, 50%, 60%, 70% and 80%. When looking at those cases in the Apple App Store for iPad, a declining trend for the negative brackets (<0%, <-20%) can be observed in the graph, while the opposite trend seems to be applicable to positive brackets (>+100%, >+50%). Moreover, the differences are quite substantial. For example, the proportion of applications with more than 20% loss in revenue, increases from 34% (when price cut is at least 40%) to only 19% (when price cut is at least 80%), while the proportion of applications with more than 50% increase in revenue goes from 11% to 30%. Please note that the data used in this graph are the averages over all days that each application was on sale.

Concluding, despite the risk of loss of revenue, putting your app on sale once in a while seems to pay off for the majority of applications and their developers. It is important to offer a significant price reduction to actually earn more revenue, however. Please note that we only used applications that were already among the 100 highest grossing applications in any category before the sale.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

Of course, this does not say anything about individual applications. For example, in this report we assume zero marginal costs (except the app stores cut), which will not be the case for most developers. Moreover, we have not looked at the long term (more than five days) effects of price cuts. However, these findings certainly indicate and point to a trend, and developers who are keen to evaluate their pricing strategy should ensure it is still the optimal one.

SO WHAT PRICE SHOULD I ASK?

This depends highly on the type of application you are (about to) publish, of course. Applications that are relatively easy to make and are copied quite fast, are typically priced lower. Applications that require a lot of work besides developing the application, e.g. navigation apps, tend to be priced significantly higher. The graph below reveals the average price among the top grossing applications per category in the Google Android Market and the Apple App Store for iPhone and iPad.

But, the average price among the most grossing applications in a category doesnt indicate how this compares to other categories. Therefore, the category breakdown of the top overall most grossing applications is given as well in the graph above. For some types of applications there is simply less demand and hence this analysis is less relevant, however, for many categories it will to a large extent be a matter of pricing. For example, the Business category is more popular by revenue and less expensive in the Google Android Market. Distimo Monitor provides benchmarks to assess your price better. With the pricing benchmark you can compare the price of your app with the prices of the 100 most popular/grossing applications in the category in which your app is published in all countries.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

DISTIMOS PAID FEATURED DECEMBER 2011 REPORT FOR ASIA, NORTH AMERICA AND EUROPE STARTING AT 399
Our Paid Featured December 2011 reports offer deep insights into all major applications stores in North America, Europe and Asia. The reports will allow you to: Gain insight into the change in the download volumes resulting from being featured in the Apple App Store for iPhone or the Apple App Store for iPad. Analyze the download volume generated in the Apple App Store and the Apple Mac App Store and the revenue generated in the Apple App Store and Google Android Market. Identify the most successful regional applications and their publishers in each store individually. Analyze the share of revenue generated by apps with in-app purchases in each region individually.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

MOST GROSSING APPLICATIONS

Rank 1 Application Battle Nations by Z2Live, Inc

APPLE APP STORE FOR IPAD - UNITED STATES - DECEMBER 2012

Category Games-Action, Games-Role Playing, etc. Games-Action, Games-Adventure Games-Arcade, Games-Family Games-Role Playing, Games-Simulation Games-Adventure, Games-Family Games-Adventure, Games-Simulation Games-Role Playing, Games-Strategy Games-Action, Games-Adventure Games-Card, Games-Casino Games-Card, Games-Casino Price Free

Infinity Blade II by Chair Entertainment Group, LLC Angry Birds HD by Chillingo Ltd DragonVale by Backflip Studios Smurfs' Village by Beeline Interactive, Inc. The Sims FreePlay by Electronic Arts Modern War by Funzio, Inc Grand Theft Auto 3 by Rockstar Games Poker by Zynga by Zynga Card Ace: Casino HD by Self Aware Games

$6.99

$4.99

Free

Free

Free

Free

$2.99 - $4.99

Free

10

Free

- this application features in-app purchases

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

MOST GROSSING APPLICATIONS

Rank 1 Application

APPLE APP STORE FOR IPHONE - UNITED STATES - DECEMBER 2011

Category Games-Action, Games-Adventure Games-Action, Games-Adventure Games-Card, Games-Casino Games-Action, Games-Arcade Games-Role Playing, Games-Simulation Games-Action, Games-Adventure Games-Role Playing, Games-Simulation Games-Board, Games-Word Games-Role Playing, Games-Strategy Games-Action, Games-Adventure Price $6.99

Infinity Blade II by Chair Entertainment Group, LLC Grand Theft Auto 3 by Rockstar Games Poker by Zynga by Zynga Angry Birds by Clickgamer.com DragonVale by Backflip Studios Call of Duty: Black Ops Zombies by Activision Publishing, Inc. Dream Zoo by Zynga Words With Friends by Zynga Modern War by Funzio, Inc Batman Arkham City Lockdown by Warner Bros.

$2.99 - $4.99

Free

$0.99

Free

$6.99

Free

$0.99 - $2.99

Free

10

$5.99

- this application features in-app purchases

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

MOST GROSSING APPLICATIONS

Rank 1 Application Defender by DroidHen Tap Fish by Gameview Studios Live Holdem Poker Pro by Dragonplay Zynga Poker by Zynga Smurfs' Village by Beeline Interactive, Inc. Fashion Story by TeamLava, LLC. Paradise Island by Cooper Media Corp. World of Goo by 2D BOY Life is Crime by Red Robot Labs

GOOGLE ANDROID MARKET - UNITED STATES - DECEMBER 2011

Category Games-Arcade & Action Games-Casual, Games-Live Wallpaper, etc. Games-Cards & Casino, Games-Live Wallpaper, etc. Games-Cards & Casino Price Free

Free

Free

Free

Games-Casual Games-Arcade & Action, GamesCasual Games-Arcade & Action Games-Brain & Puzzle

Free

Free

Free

$2.99 - $4.99

Games-Casual

Free

10

DocumentsToGo Full Version Key by DataViz, Inc.

Business

$15,-

- this application features in-app purchases

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.

Distimo Publication - January 2012

DISTIMO CUSTOM REPORTS

Aside from this free monthly publication, Distimo produces custom reports capable of providing specific mobile application store analytics that are relevant to your company. Custom reports are currently available for any country worldwide for the Amazon Appstore, Apple App Store for iPhone, Apple App Store for iPad, Apple Mac App Store, BlackBerry App World, GetJar, Google Android Market, Nokia Ovi Store, Palm App Catalog, Windows Phone 7 Marketplace. Additional application stores will be available in the coming months. To get a better idea of the type of data and metrics that Distimo can provide, please visit our Report product page.

CONTACT US
For sales enquiries, please contact Remco van den Elzen, VP Business Development at remco@distimo.com or call +31 30 82 00 567. For press enquiries please contact Mindy M. Hull at mindy@mercuryglobalpartners.com or call +31 62 504 7680 (EU) or +1 415 889 9977 (USA).

ABOUT DISTIMO
Distimo was founded to solve the challenges created by a widely fragmented app store marketplace filled with equally fragmented information and statistics. Distimo was launched shortly after the introduction of the first app store. App stores have clearly shown since that time that they are the way forward for content distribution. The app store model offers an enormous opportunity for developers to get their content out and dramatically improves content discovery by consumers. However, the mobile market has long been characterized by fragmentation, which is also displayed in the wide range of mobile application stores that were launched from 2009 on. Distimo is a privately held company based in Utrecht, The Netherlands. Learn more: www.distimo.com

Disclaimer This work is licensed under Creative Commons License Attribution Noncommercial-Share Alike 3.0 Netherlands. This license is available for download at http://creativecommons.org/licenses/by-nc-sa/3.0/nl/. This license ables you to use, copy, spread, and build upon this work non-commercially, as long as you credit Distimo and license your new creations under the identical terms.

Distimo 2012, some rights reserved. All trademarks are the property of their respective owners.