Pricing for Success: App Industry Trends and Best Practices

Pricing for Success:App Industry Trends and Best PracticesHendrik Koekkoek, Analyst, Distimo

Mobile App StoresGreat for Consumers, but There Are Many…

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Distimo Report Data Examples Worldwide Consumer iPad’s Road to 75k applications Activity iPhone

MAJOR TRENDS IN APP PRICINGWHAT DOES THIS MEAN FOR YOU?

1. App Pricing

Average Listing Prices Whole Store $5.26 $4.81* $4.17 $3.84 $3.30 $3.29 V CAST HAS HIGHEST AVERAGE LISTING PRICE AMONG MOBILE PHONES APP STORES * April 2011 data, others July 2011

Average Listing Prices Whole Store vs. Most Popular Whole Store Most Popular +3% +15%* +16% -18% +118% +1% THE AVERAGE V CAST APP IS SLIGHTLY OVERPRICED BUT FINDING THE RIGHT PRICE FOR YOUR APP IS NOT EASY * April 2011 data, others July 2011

Average Listing Prices Whole Store vs. Most Popular +160% Whole Store Most Popular +237% +283% +33% +330% No Data Medical Healthcare Medical Medical Lifestyle HEALTH RELATED APPLICATIONS TEND TO BE OVERPRICED ACROSS STORES, SO ARE ENTERTAINMENT APPLICATIONS July 2011 Data

Average Listing Prices Per Category Most Popular Apps Store AVG $1.76 July 2011 Data

Average Selling Price Most Popular Apps $3.94 $3.79 * $1.47 Weighted Average Price, * April 2011 data, others July 2011

Average Selling Price Most Popular Apps $3.94 $3.79* $1.47Since July 2010: -21% No Data -27% INCREASING COMPETITION LOWERS PRICES Weighted Average Price, * April 2011 data, others July 2011

Recap: App Pricing• AVERAGE LISTING PRICE AND AVERAGE SELLING PRICE OF APPS DECLINING: DON’T OVERPRICE YOUR APP• APPLICATION PRICES CAN DIFFER A LOT ACROSS CATEGORIES: KEEP IN MIND THE CATEGORY IN WHICH YOUR APP IS PUBLISHED

2. New Monetization Strategies Become Key Revenue Driver

Proportion of Available Free vs. Paid Apps 81% 19% 76% 24% 66% 34% 60% 40% 54% 46% 38% 62% Paid Apps Free Apps MOST STORES HAVE A MAJORITY OF PAID APPS * April 2011 data, others July 2011

Volume Growth Since July 2010 (iPhone) July 2011 data

Volume Growth Since July 2010 (iPhone) INCREASE IN DOWNLOAD VOLUMES HIGHER FOR FREE APPS THAN FOR PAID APPS IN THE APPLE APP STORE FOR IPHONE July 2011 data

Proportion of Free Volume vs. Paid Volume 8.7 11.8 13.7 100 100 100 IN V CAST APPS, FOR EVERY 100 DOWNLOADED FREE APPLICATIONS 11.8 PAID APPLICATIONS ARE DOWNLOADED ON AVERAGE. THIS IS HIGHER THAN THE IPHONE’S AVERAGE

IPHONE OF ALL APPLICATIONS FEATURE IN-APP PURCHASESBased on United States – July 2011

OF REVENUE COMES FROM APPS FEATURING IN-APP PURCHASESBased on 200 most grossing applications in United States – July 2011

THAT’S UP FROM28% LAST YEAR!REVENUE FROM APPLICATIONS THAT FEATURE IN-APP PURCHASESBased on 200 most grossing applications in United States – July 2010 & July 2011

IN-APP PURCHASESINTRODUCEDTO ANDROID MARKETIN MARCH 2011. 68% OF 25 MOST GROSSING APPLICATIONS USE IN-APP PURCHASES NOWBased on 25 most grossing applications in United States – August 2011

Possibilities in V CAST NO IN-APPS YET, BUT: 44% OF REVENUE OF 200 MOST GROSSING APPLICATIONS GENERATED BY SUBSCRIPTIONS

Recap: New Monetization Strategies• DOWNLOAD VOLUMES OF FREE APPLICATIONS MUCH HIGHER THAN DOWNLOAD VOLUMES OF PAID APPLICATIONS• IN-APP PURCHASES HAVE BECOME AN IMPORTANT MEANS OF INCOME IN COMPETING STORES• SUBSCRIPTIONS ALREADY A LARGE DRIVER OF INCOME IN V CAST APPS SEEK FOR OTHER WAYS OF MONETIZATION THAN A ONE OFF FEE EXPLORE THE POSSIBILITIES OF A SUBSCRIPTION MODEL OR IN-APP PURCHASES FOR YOUR APP

3. Channel Fragmentation: Going Beyond Mobile

Download Volume Top 300 Free – United States 100 : 12.9 JANUARY 2011 Based on transactional data from Distimo Monitor top 300 free applications US – January 2011 & July 2011

Download Volume Top 300 Free – United States 100 : 12.9 100 : 18.5 JANUARY 2011 JULY 2011 Based on transactional data from Distimo Monitor top 300 free applications US – January 2011 & July 2011

Download Volume Top 300 Paid – United States 100 : 25.8 JANUARY 2011 Based on transactional data from Distimo Monitor top 300 paid applications US – January 2011 & July 2011

Download Volume Top 300 Paid – United States 100 : 25.8 100 : 29.2 JANUARY 2011 JULY 2011 Based on transactional data from Distimo Monitor top 300 paid applications US – January 2011 & July 2011

Revenue Top 300 Paid – United States 100 : 68.9 JANUARY 2011 Based on transactional data from Distimo Monitor top 300 paid applications US – January 2011 & July 2011

Revenue Top 300 Paid – United States 100 : 68.9 100 : 78.1 JANUARY 2011 JULY 2011 Based on transactional data from Distimo Monitor top 300 paid applications US – January 2011 & July 2011

Recap: Channel Fragmentation• COMPARING THE IPHONE TO THE IPAD, DOWNLOAD VOLUMES OF THE IPAD ARE CONVERGING TOWARDS THOSE OF THE IPHONE.• IN TERMS OF REVENUE, TOP IPAD APPLICATIONS GENERATE ALMOST FOUR FIFTH OF THE REVENUE OF TOP IPHONE APPLICATIONS OPTIMIZE YOUR APPS FOR TABLETS!

Recap

Recap• AVERAGE LISTING PRICE AND AVERAGE SELLING PRICE OF APPS DECLINING• APPLICATION PRICES CAN DIFFER A LOT ACROSS CATEGORIES• DOWNLOAD VOLUMES OF FREE APPLICATIONS MUCH HIGHER THAN DOWNLOAD VOLUMES OF PAID APPLICATIONS• IN-APP PURCHASES HAVE BECOME AN IMPORTANT MEANS OF INCOME IN COMPETING STORES• SUBSCRIPTIONS ALREADY A LARGE DRIVER OF INCOME IN V CAST APPS• COMPARING THE IPHONE TO THE IPAD, DOWNLOAD VOLUMES AND REVENUES OF THE IPAD ARE CONVERGING TOWARDS THOSE OF THE IPHONE

What Does This Mean?

What Does This Mean for You?DON’T OVERPRICE YOUR APPLOOK AT THE PRICES OF POPULAR APPS IN YOUR CATEGORYSEEK FOR OTHER WAYS OF MONETIZATION THAN A ONE OFF FEEEXPLORE THE POSSIBILITIES OF A SUBSCRIPTION MODEL OR IN-APP PURCHASESFOR YOUR APPOPTIMIZE YOUR APPS FOR TABLETS

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Hendrik Koekkoekhendrik@distimo.com Custom in-depth The free app store market cross-platform app reports for carriers store monitoring & manufacturers tool for developersFor more info, visit report.distimo.com For more info, visit monitor.distimo.com

Thank you.