Has the Move From Paid to Free iOS Apps Peaked?

Last month we looked at the breakdown between free and paid apps at the end of the first half of 2015. This time we wanted to dig further into the data and see how the numbers have changed since 2014.

First off, It’s clear that free apps are doing great. They make up a higher proportion of all apps and of the new apps that come out every month. But, when we analyzed this number of new free and paid apps a bit deeper, we were in for a surprise.

Between March and June 2014, there was a dramatic decline in monthly new paid apps but only a slight decline in monthly new free apps. The graph below shows the number of new free and paid apps across all genres that were added to the iOS appstore each month. On average, about 38,000 new free apps and 8,000 new paid apps were added per month. But, the number of new free apps decreased at a rate of about 900 apps per month while the number of new paid apps decreased at a rate of about 2,900 apps per month, making the rate of the new paid app decline more than 3x the rate of the new free app decline.

New iOS iPhone Apps 2014
For the same period in 2015, there seems to have been a complete reversal: the decline in new paid apps slowed, whereas the decline in new free apps became more aggressive. The graph below shows that about 52,000 free apps and 7,000 paid apps were added on a monthly basis. But as opposed to 2014, the number of new free apps decreased at a rate of about 3,300 apps per month and the number of monthly new paid apps decreased at a rate of about 1,000 apps per month, making the rate of the new paid app decline less than 1/3 the rate of the new free app decline.

New iOS iPhone Apps 2015
Though this analysis only takes into account what happened in a four-month period during the first half of 2014 and 2015, we can see that the aggressive decline in new paid iOS apps of last year leveled earlier this year while the decline in new free apps is now significantly stronger than it was in 2014. Does this mean that the trend of abandoning the paid app model in favor of free and freemium apps is slowing down?  It sure looks like it, but to be certain we will need to continue investigating throughout 2015! Stay tuned for more!

Paid Apps have a 40% Better Chance of Getting Rated Compared to Free Apps

This week, the team at The Loadown has been investigating more about the ins and outs of iOS iPhone apps. We are constantly searching for data to teach us about the behavior of the appstore, and the differences and similarities between paid and free (including freemium) apps. Previously, we’ve talked about the split between paid and free apps across genres, but we wanted to get more specific.

This week’s burning question: Which apps get rated more and/or better: free or paid?

We first analyzed all the appstore’s data from July 21st, 2015 to see what the average number of user ratings (example: currentversion2a) a typicall free and paid iPhone app gets in each genre (see graph below).

Average Number of User Ratings Per Genre

Overall, free apps had approximately 2.5 times more ratings across all genres (average of 146 ratings/app) compared to paid apps (average of 57 ratings/app). This makes sense given that at the price point of $0 their are significantly more users of free apps compared to paid apps, which would lead to significantly more ratings for the popular free apps. Enough ratings to increase the average rating per free app.

Games, Social Networking and Weather were the genres that received the highest average number of ratings per paid or free app. For example, a typical paid game had 241 ratings while its free counterpart had 408 ratings. Compare this to Education, the genre claiming the lowest average number of ratings, with its 12 ratings per paid app and 31 ratings per free app. Across the App Store, only the Business and News Genres had more average ratings per paid app vs free app.

So it’s clear: free apps typically get more ratings than paid apps.

However…Are free apps more likely to get rated than paid apps? To answer this question, instead of average number of ratings per app, we looked at the number of apps with a particular rating per genre (example: currentversion1) relative to the total number of paid and free apps (see graph below). We grouped apps in 3 categories based on how they were rated: low (1 and 2 stars), medium (3 stars), and high (4 and 5 stars).
Likelihood of ★ Ratings Per Genre, Paid vs Free iOS Apps (2015)

From our data we can see that while 18% of all free apps actually get rated, 25% of all paid apps get rated. Another way to say this is that paid apps have a 40% higher likelihood of getting rated compared to free apps. Users that pay for an app are clearly more inclined to rate their purchase compared to those not paying for an app. There were two notable exceptions: Games and Books. For Games, this makes sense, since some of the most popular and best rated apps are free games. Books, on the other hand,  is one of the smaller genres, but the only one where paid apps outnumber free apps.  This particularity might account for better ratings for free apps.

The question that remains, therefore, is whether paid apps get higher ratings than free apps.

Likelihood of 4 & 5 ★ Ratings Per Genre, Paid vs Free iOS Apps (2015)

By looking at the number of apps with a high (4 and 5 stars) rating per genre relative to the total number of paid and free apps (see above graph) we find that about 10% of all paid apps are highly rated compared to approximately 9% of free apps. Paid apps are therefore more likely to be rated with 4 or 5 start than free apps. Of the 22 active genres, Business, Food & Drink and Music more highly favor paid apps in this area, while Games, Photo & Video and Books more highly favor free apps.

Conclusion…Given the $0 price tag of a free app, it is normal that free apps have more ratings on average than paid apps.  But, the deeper trend that we discovered through this analysis was that, while free apps were rated more on average, paid apps were more likely to be rated and were more likely to be rated better. So for all you developers and marketers trying to figure out what business model to adopt for your app, take a second look at charging for it. If the value is there (with your app) and you are not ready to put some resources in creating a successful in-app purchase funnel, which requires providing tons of free value up-front and fine-tuning conversions ad-nauseum, then a paid app may be best for you.

Stay tuned for more wisdom from The Loadown as we answer more burning questions about mobile apps!

Paid vs Free iOS Apps in the First Half of 2015

This week, we started digging to answer a burning question: What is the split between paid and free (including freemium) iPhone apps for every genre in the iOS appstore?

Paid vs. Free iOS Apps, 1H 2015

We did a detailed analysis between free and paid apps at the end of the first half of 2015 (see graph above), and found some interesting results:

  • Of all the apps active during this period 27% were paid.
  • The Business genre had the highest ratio of free to paid apps; out of 179,352 apps, 94% were free and 6% were paid.
  • The genre with the most number of apps was Games, with a total of 362,487 apps, of which 72% were free and 28% were paid.
  • Of all the genres, Books had the highest ratio of paid to free apps; out of 65,484 apps, 57% were paid and 43% were free.

In the coming weeks, we will be investigating further to see how apps within each genre behaved from month to month, or even week to week. Stay tuned for more from The Loadown!

Featured in Forbes.com: Hacking Mobile App Discovery

The Loadown was featured in a piece by Alex Konrad that appeared on forbes.com yesterday: ‘How Amazon-Style Pricing And Portfolio Tactics Can Hack The Crowded App Market.’ The article included insights on the role of pricing optimization and portfolio diversification in app discovery.

Here are some highlights:

… for those who aren’t a Top 10 viral hit or willing to spend millions on marketing like Game Of War’s pricey Kate Upton campaign, regular price adjustments can help surface an app back from the purgatory of the App Store’s (figurative) back shelves.

The most room to maneuver and benefit comes with apps that are priced more than $0.99 and thus have more potential to discount or boost prices incrementally. But even switching apps from periods of free sales to paid stretches can improve performance, the Loadown team says.

In a 39-week study of about 7,6000 apps from 4,000 sellers, sellers expanding into a new category instead of launching their first app saw a 15% bump on top-grossing charts for each additional category they entered. (study by Arizona State University’s W.P. Carey School of Business)

For more information about our dynamic app pricing optimization service, to start a free pilot for your apps and get significant increases in both downloads and revenue, contact us at grow@theloadown.com.

Turnover in iOS Top 200/400 Ranks Part 2: Which Categories Offer the Best Chance for Discovery

In continuation of our paid apps vs free apps theme and our Part 1 focused on a daily analysis of app turnover in Apple’s iPhone and iPad Top 400 lists (now Top 200 lists), we looked at how this app turnover differs by genres/categories. Why is app turnover important: because, as entries/exits into the top ranks increase, it improves the chances of a new app to be found and therefore provides an indication of  which business model (i.e. paid or free) or genre/category offers the best opportunity for discovery.

The two graphs below show, for May 2014, the average daily number of iPhone and iPad apps by genre/category that entered the Top 400 Free, Paid and Grossing ranks (i.e. they had not been ranked the previous day).  Based on the data collected, it is clear that most categories of iPhone apps had a greater amount of paid app turnover. The only exceptions that had more free app turnover were the Catalogs, News, Newsstand and Weather genres.

TheLoadown_iPhoneRankbyGenre2

For iPad categories, while close to a third had more free app turnover, most still favored paid app turnover. The most extreme cases of this were the Travel, Lifestyle and Health-Fitness genres with close to 200 new apps entering the top ranks every day.

TheLoadown_iPadRankbyGenre2

Whether you are still trying to decide on what business model to follow (paid/free, with/without in-app purchases) or you are trying to further optimize your paid app a better understanding of genre/category dynamics is important. As the data above shows, some categories clearly allow for more newcomers to pierce through the exclusive club of ranked apps. And, in a market with millions of apps, any help can make a difference.

We believe that #PaidAppsRule

Turnover in iOS Top 200/400 Ranks Part 1: Which Business Models Offer the Best Chance for Discovery

In our quest to better understand App Store dynamics, especially when it pertains to paid apps vs free apps, we decided to analyze how much app turnover there was in Apple’s iPhone and iPad Top 400 lists (now Top 200 lists). We looked at how many apps entered (and thus exited) the Top 400 Free, Paid and Grossing lists (by category) throughout the month of May 2014. These entries/exits are important because, as they increase, they provide an indication of  which business model (i.e. paid or free) or genre/category offers the best opportunity for discovery.

The two graphs below show, for May 2014, the number of iPhone and iPad apps that entered the Top 400 Free, Paid and Grossing ranks but that had not been ranked the previous day. For both iPhone and iPad apps, generally more than three quarters of Top 400 Paid and Top 400 Grossing apps remained ranked from one day to the next. For iPhone apps, the daily turnover in the Top 400 Paid list and in the Top 400 Grossing list (for both paid and free apps) was more than double that of the Top 400 Free list. For iPad apps it was nearly double, with free apps having an average of 51 new entrants a day in the Top 400 Free compared to an average of 35 new entrants a day for iPhone apps, a 46% difference.

Number of Apps Entering/Exiting Top 400 iPhone Lists by Day

Number of Apps Entering/Exiting Top 400 iPad Lists by Day

 

Does this mean that a Paid app has a better chance of getting ranked and potentially getting discovered? About 1 out of every 8 apps is a paid app and therefore it is clearly easier for a paid app to get ranked. But the fact that there is more active turnover in the Top 400 for paid apps (and for paid or free Top Grossing apps) makes the competition for Top Paid and Grossing ranks far more open than for Top Free ranks.

We still believe that #PaidAppsRule

6 Rules to Follow When Using Price Changes to Boost your App’s Discovery & Downloads

We have spent a great deal of time working with mobile app publishers, developers and marketers on optimizing the price of their paid apps in order to maximize downloads and revenue. Here are our key rules on developing your own price marketing strategy:

  • Repeat Frequently: All paid apps should look to go on sale, on average, at least once per month. With the corresponding price increase, that makes 24 price changes per year. More experienced app developers and marketers can look to do more to maximize downloads, including intraday changes to target specific countries or types of users, but 1 per month is a good start for most apps.
  • Allow Settling Time: Price changes can take anywhere from 20 minutes to more than 15 hours to spread throughout iTunes’ storefronts (New Zealand is usually one of the first then it follows time zones to reach European storefronts and the US). In addition, it can take time for users to discover the new price, either directly or through a third party site like AppShopper. So unless you are looking to make multiple price changes a day, which is rewarding but requires constant attention and/or the right tools, most publishers should let their app’s sale breathe for 48 to 72 hours.
  • Focus on Down Cycles: Given the cyclical nature of downloads and ranks, price changes should generally not be made when the app is experiencing a growth spurt. Instead, the price change should be timed with an app’s slowing downloads or sagging rank.
  • React to Competition: If your app is a soccer app at $2.99 and EA’s FIFA 2014 goes from $4.99 to $0.99, you need to react immediately, in order protect your positioning and sales. If this example does not directly apply to you, remember that competitors are not just direct competitors. They may also be apps ranked just above you in your genre or category, or those appearing before you in key searches on iTunes.
  • Avoid Predictability: Varying the times, days of the week and the amounts of your price changes will avoid predictability that could be gamed by both competitors and users.
  • Test Often: Every price change should be an opportunity to test a new price and new price steps. That may not always be possible if you are at $0.99 and going free. But even then you should be testing various target prices (the price you go to after a sale). Here are examples of variations in price changes:
    • The price of your app is lowered to varying tiers in 1 or 2 steps (e.g. $3.99 -> $0.99 or $3.99 -> $0.99 -> $0.00)
    • Then the price is increased in 1-3 steps (e.g. $0.99 -> $3.99, $0.99 -> $4.99 -> $3.99, $0.99 -> $1.99 -> $3.99)

Pricing changes are a simple, effective way to get your app in front of people. You can make these changes yourself, or if you’re looking for some extra assistance, let us know.