App Development

New Analysis Uncovers When to Launch Free and Paid Apps to Maximize Income

App Development

Researchers from Tulane College and College of Maryland revealed a brand new paper within the Journal of Advertising that examines the dynamic interaction between free and paid variations of an app over its lifetime and suggests a potential treatment for the failure of apps.

The examine, forthcoming within the Journal of Advertising, is titled “Managing the Versioning Choice over an App’s Lifetime” and is authored by Seoungwoo Lee, Jie Zhang, and Michel Wedel.

Is it actually over for paid cellular apps? The cellular app {industry} is exclusive as a result of free apps are way more prevalent than paid apps in most app classes, opposite to many different product markets the place free merchandise primarily play a supportive position to the paid merchandise. Apps have been trending towards the free model previously decade, such that in July 2020, 96% of apps on the Google Play platform have been free. Nonetheless, 63% of the free apps had fewer than a thousand downloads monthly and 60% of app publishers generated lower than $500 monthly in 2015.

Are there methods for paid apps to make free apps extra worthwhile? And the way can app publishers enhance profitability by strategically deploying or eliminating the paid and free variations of an app over its lifetime? To reply these questions, the analysis crew investigated app writer’s choices to supply the free, paid, or each variations of an app by contemplating the dynamic interplays between the free and paid variations. The findings supply invaluable insights for app publishers on the right way to handle the versioning resolution over an app’s lifetime.
First, the researchers display how the free and paid variations affect one another’s present demand, future demand, and in-app revenues. They discover that both model’s cumulative consumer base stimulates future demand for each variations through social affect, but concurrently providing each variations hurts the demand for one another within the present interval. Additionally, the presence of a paid model reduces the in-app buy fee and lively consumer base and, due to this fact, the in-app buy and promoting revenues of a free app, however the presence of a free model seems to have little destructive influence on the paid model of an app. Subsequently, app publishers must be aware of the paid model’s destructive influence on the free model. Usually, concurrently providing each variations helps a writer obtain value financial savings through economies of scale, but it surely reduces revenues from every model in comparison with when both model is obtainable alone. 
Second, analyses present that the commonest optimum launch technique is to supply the paid model first. Paid apps can generate obtain revenues from the primary day of gross sales, whereas in-app revenues from both model depend on a sizeable consumer base which takes time to construct. So, publishers can depend on paid apps to generate working capital and recuperate growth and launch prices way more shortly. Nonetheless, there are variations throughout app classes, that are associated to variations in apps’ skills to monetize from completely different income sources. For instance, the share of utility apps that ought to launch a paid app is especially excessive as a result of they’ve a decrease capability to monetize the free app by means of in-app buy gadgets and promoting. In distinction, leisure apps ought to principally launch a free model as a result of they’ve excessive availability of in-app advert networks and in-app buy gadgets. 
Third, the optimum versioning choices and their evolutionary patterns change over an app’s ages and fluctuate by app class. The evolutionary patterns of optimum versioning choices present that, for many apps, the relative profitability of the free model tends to extend with app age whereas that of the paid model tends to say no. Subsequently, the profitability of concurrently providing each variations tends to extend with app age till a sure level, after which the free-only model will take over as the commonest optimum versioning resolution, which happens about 1.5 years after launch on common for the (comparatively extra profitable) apps within the information. Additionally, there’s substantial cross-category variations within the versioning evolution patterns. For instance, not like for the opposite classes examined, the optimum versioning resolution for many utility apps in our information is to stick with the paid-only choice all through an app’s lifetime. 
This analysis reveals the dynamic interaction between free and paid variations of an app over its lifetime and suggests a potential treatment for the failure of apps. Because the researchers clarify, “Many apps that begin out with a free model fail as a result of they can’t generate sufficient income to maintain early-stage operations. We urge app publishers to pay shut consideration to the interaction between free and paid app variations and to enhance the profitability of free apps by strategically deploying or eliminating their paid model counterparts over an app’s lifetime.”

Reference: “EXPRESS: Managing the Versioning Choice over an App’s Lifetime” by Seoungwoo Lee, Jie Zhang and Michel Wedel, 18 February 2021, Journal of Advertising.
DOI: 10.1177/00222429211000068

Concerning the Journal of Advertising 

The Journal of Advertising develops and disseminates information about real-world advertising and marketing questions helpful to students, educators, managers, coverage makers, customers, and different societal stakeholders around the globe. Printed by the American Advertising Affiliation since its founding in 1936, JM has performed a major position in shaping the content material and bounds of the advertising and marketing self-discipline. Christine Moorman (T. Austin Finch, Sr. Professor of Enterprise Administration at the Fuqua College of Enterprise, Duke College) serves as the present Editor in Chief.

Concerning the American Advertising Affiliation (AMA) 

As the most important chapter-based advertising and marketing affiliation on the earth, the AMA is trusted by advertising and marketing and gross sales professionals to assist them uncover what’s coming subsequent within the {industry}. The AMA has a neighborhood of native chapters in additional than 70 cities and 350 school campuses all through North America. The AMA is residence to award-winning content material, PCM® skilled certification, premiere tutorial journals, and industry-leading coaching occasions and conferences.

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