Distimo: Discounted app prices can cause sales to spike

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Offering iOS and Android applications at discounted prices can lead to significant revenue increases according to new data from app store analytics firm Distimo.

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Discounting app prices can lead to significant revenue increases.

Looking at the 100 highest grossing applications in any category, developers who offer paid apps at sale prices on Apple's (NASDAQ:AAPL) App Store for iPhone experience first-day sales revenue spikes averaging 41 percent, with revenues increasing an average of 22 percent overall during the sale period. Discounted applications on the App Store for iPad experienced an average first-day revenue increase of 52 percent and a 19 percent jump during the sale period, while sale-priced apps in Google's (NASDAQ:GOOG) Android Market averaged a first-day revenue jump of 7 percent and a 29 percent increase over the sale period.

"When looking closer at these numbers, 44 percent of the iPhone applications that have been on sale lost revenue during the sale, and 23 percent saw a decline in revenue by more than 20 percent," Distimo analyst Gert Jan Spriensma states. "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 percent. 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)."

Distimo adds that featured app store placement also exerts dramatic impact on developer fortunes. After examining apps already ranked among the top 100 most popular in their respective stores, Distimo found the average gain in the first three days after landing featured placement was highest in Android Market (+42 ranks), followed by the App Store for iPad (+27 ranks), and App Store for iPhone (+15). Ranking gains were more or less equal to across the complete seven-day feature period in both Apple stores, but were even higher in Android Market (+65 ranks).

"Being featured has a positive effect on the performance in the long run as well," Spriensma adds. "On average the gains in the five days after being featured were still +145 percent, +75 percent and +828 percent in the Apple App Store for iPad, Apple App Store for iPhone and the Google Android Market, respectively."

For more:
- read this Distimo blog entry

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