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Case study: How app pricing strategies impact on revenue and downloads

Developers and consumers are only just beginning to see the relevance of apps and their application in everyday life – excuse the pun – not just browsing catalogues or downloading the latest gimmicky talking cat. Apps are beginning to get serious! However, the fact remains that they have already been embraced early by gamers. Here we find large download figures and fierce ranking & price battles between rival developers. In the US Apple App Store 45 out of the top 50 grossing apps are games. So, how can developers affect the ranking of their own apps by adjusting the price alone?

Distimo is able to estimate downloads and revenue of Apps based on users of their analytics software. Looking at Disney’s “Temple run: Brave”, which is normally priced at $0.99 in the US Apple App Store, Distimo has captured some interesting insights when the developer reduced its price during the first week of September 2012.

App Download - Brave App Distimo

Impact on downloads

Before the price change, the game was receiving a steady 4,000 daily downloads @ $0.99. Then, during the first week in september, the estimated downloads spiked to approximately 180,000 downloads, dropping down to 100,000 during the week. During this time, the app price reduced to zero, presumably causing the app to rank dramatically higher as downloads increased as well.

Brave Disney App - Spike in Downloads

Then, after 7 days, the developers re-instated the $0.99 price tag and downloads subsequently dropped to a steady 4,000 per day – exactly the same as before the app was free.

App revenue

Now let’s have a look at estimated revenue. The game earns roughly $4,000 per day at the start of August, with a steady decline towards a revenue of $1,657 per day, to the point where the app is free – with peaks and troughs along the way, caused by a weekly cycle in download patterns.

How Pricing Strategies Impact On App Revenue

The graph clearly shows the “flat line” in revenue caused by the app “giveaway” for approximately seven days, followed by the spike in revenue to over $2,000 when the selling price is restored to $0.99. There is, however, a continuation of the trend in declining revenue, albeit noticeably less than before.

Revenue Decline App Pricing Strategies

So, at this point we ask, what was the net gain? At least, we can surely assume the developers would have been asking this. The game also offers in-app purchase opportunities which are packs of gold coins ranging between $0.99 and $19.99.

In the graph below, you can see the in-app purchasing revenue (blue) overlaid on the estimated download revenue. The day the app was made free, there is a large spike with in-app purchasing to approximately $1,500, which drops and increases again to $1,000. Ok, so the little wobble might just be caused by the regular weekly cycle, but generally an increase with in-app purchases nonetheless. Furthermore, once the app selling price increases to the usual $0.99, the in-app purchasing begins to fall and plateau. Even so, the in app purchases after the giveaway now provides a higher percentage of the total revenue, compared to before.

In-App Purchasing: App Pricing Strategies

So, it seems that the huge surge in new users have been swayed by the attractive price, like a fish to a baited hook, have been reeled in and become engaged with the game, resulting in additional in-app purchases.

We could only speculate as to why the developers did this only for a week. Perhaps they could see the revenue declining and the download figures stagnate. So they drop the price and the desired effect occurred – they gain sufficient new users to bolster in-app purchasing and begin to slow down the declining revenue from downloads. A simple, but neat trick.

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Graeme Sewell

Director of Innovation at Webcertain
Graeme has been in the international search industry since 2005 and is currently the Director of Innovation at Webcertain. Prior to his current position, Graeme was primarily cutting his teeth on apps and paid search and working with some of the most significant advertising platforms across the globe and servicing a wide range of multinational brands with strategic consultancy, campaign planning and bid management. Following this he co-founded and led KeywordFluency, a company specialising in turn-key multilingual solutions ranging from international paid search, SEO, online PR, social media and consulting, specifically designed for agencies.

One Response to Case study: How app pricing strategies impact on revenue and downloads

  1. Very interesting article!

    The importance of having a price strategy when launching campaign for app development

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