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THE MONEY SHOT
Discounting Works in App StoresMonday, January 30, 2012 Price matters with consumers when it comes to apps, even though many are already priced to move.  According to app analytics company Distimo’s recent survey of price points affecting sales in iOS and Android stores, the average revenue for a top 100 grossing iPhone app was increased 41% on the first day of its sale and 22% across the full span of the sale period. For iPad apps, revenue rose even more dramatically, 52% on day one and 19% for the full span of the sale. In the Google Android Market the initial effect of price decreases is much more muted at the front end, increasing revenues only 7% on the first day, but more noticeable overall, increasing sales 29% over the longer haul. This is not to say that discounting is a sure thing. In fact, Distimo’s overall figures are averages that reflect select success stories. Overall, 30% to 50% of apps on sale actually saw revenue decreases even though the full group of sale items across the stores rose. Distimo explains that a successful discounting strategy that increases volume enough to compensate for the lower price, usually involves a steep cut. They find that the optimum discount was 50% or placing an app into one of the two lowest price points, 99-cents or $1.99. Popularity breeds success in discounting. The titles already in the top 100 most popular apps enjoyed greater organic visibility for their sales. For iPad, a sale could typically increase an app rank 27 steps up the ladder, 42 for Android and 15 for iPhone. Magazine publishers need to remain aware that Distimo’s figures reflect buying habits across content categories, and are likely heavily influenced by games, which occupy all ten slots in its list of top grossing apps for December. Anecdotally, magazines tell us that some discounted or free incentive in a magazine app is most effective in generating digital edition sales. Future UK, for instance, was quick to populate the iOS Newsstand when Apple introduced the new subscription-only section to iPhone and iPad users this fall. Each of its titles offered downloaders a free back issue as a complete sample of their digital edition work. The company saw a strong uptick in its iOS subscriptions as a result. While the arrival of a reasonably priced subscription model to the App Store seems to have relieved some consumer backlash against per-issue pricing, most users continue to resent what feels like a bait-and-switch: downloading a “free” digital magazine shell app that offers no content whatsoever without an additional charge. Publishers have to learn to give something away or offer a heavily discounted first issue if they want to satisfy readers' curiosity.
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