Hacking the App Store – Pricing

Once we rid ourselves of traditional thinking we can get on with creating the future. – James Bertrand

To Free or Not To Free

As many of you know, I developed my own iPhone app in order to gain data to share with everyone out there who wants to know how the app store works. It's been about 2 months now and I'm starting to learn a few trends that I think are pretty cool and can really power the marketing behind apps. This is going to be an ongoing series about how to break the app store market, much the way SEO was an open market around 2004. With any luck, you'll be able to use my experience for your own research or as inspiration to get in the game.

This post is about how price cycling can really accelerate your download numbers. Price cycling means you switch from paid to free over and over again. I'm going to do my best to explain every aspect of this process so that you see where I'm coming from and why this is an imperfection in the market.

A few key assumptions

Before I get into this, I want to be clear that this is not the best strategy for everyone. It hinges on linear revenue relative to number of active users. So – to get the max bang for your buck, this is what you should have:

1. Revenue models beyond downloads – this can be iAds, Admob, or cross promotion widgets. I use Playhaven and it totally kicks ass. They've done a great job and I'm really happy about their customer service. I'll talk about this more later on.

2. You don't have a product that is price sensitive – some products can get slammed if you go from $2.99 to Free then back to $0.99 via reviews. Customers can get pissed off if they feel like they got ripped off. Luckily, I'm not concerned about this (not in a mean way), but it's something to think about if you have a brand or fragile product.

3. You're in a high volume category – my game is in the Arcade and Action subcategories of Games which both have huge download numbers. I have another app that's in Lifestyle and is very simple and this model did NOT work for that. It's a bit of apples and oranges because of the product quality, but it's also just that certain categories get bigger numbers.

Free vs. Paid Apps Snapshot

OK – here are the screen shots that you all want to see. The first is the download numbers and the second is the revenue numbers. PS this is from AppViz – which is a great software tool for tracking app data.

Free app download numbersFree app revenue numbers

In the first graph you see raw download numbers – the first was my first switch to Free and I was picked up by all the app aggregator sites. The second was when I went free I went to the top 10 in Japan for my sub categories. The third time I was picked up by Korea's top 25. Who knows what will happen next time, but every time I've made it onto most country's top 100 free lists.

In the second graph you can see the breakdown of revenue. The blue represents actual app download revenue (when it was paid). The first was when it was $0.99, the second was at $1.99, the third at $2.99. The fact that I sell just as many apps when it's $1.99 and $2.99 is another blog post entirely, but I need WAY more data to prove that. The rest of the colors represent the different in-app purchases from the app which are upgrades for planes, currency, etc.

You can see in the top that there is a HUGE swing in download numbers when I make the app free, but there isn't a huge swing in revenue. If I had nothing in the app that could benefit from a large user base (Playhaven, iAds), I probably wouldn't care much about making it free vs keeping it paid.

BUT – here's a third graph taken from Playhaven to paint the full picture:

Boom! You see what I'm saying? The raw number of people engaged in my app is directly proportional to the paycheck I get every month. Beyond the app revenue, there is huge incentive for me to jack up the user base as big as possible. I can't really draw any solid conclusions between the in-app purchases and the size of the user base yet, but I think I'll be able to in a few more months.

How the $*(#_@ Does This Happen?

Ah, yes, good question. The title of this post “Hacking the App Store” was not just catchy – it's literally what's happening. If you Google “latest free apps” or anything similar to that, you'll see thousands of websites that are aggregating all the apps that went free or dropped price today. These websites stream the RSS and XML feeds from Apple that says what's new and what's changing in the iTunes store, which the websites parse out through their website and apps with a deep-linked affiliate code. The websites make 5% off every purchase you make in the next 48 hours. They are making SERIOUS money doing this.

App aggregator This is exactly why the Apple market is going to always be the little brother of the internet (Google, mostly). It's nearly impossible to control this type of behavior, at least for now, and thus creates an opportunity to capitalize on it. And, since the market is growing so quickly, the numbers are always going to be there.

Size Matters, Baby

For my game, the size of my user base is very important. Currently I have about 81,000 downloads in under two months which I think is OK – other games that have not done this cycling are about 20,000 in the same time frame. Similarly, there are apps that have over a million in a month.

I think there's a lot to be said for graphics and copy writing – icon, screenshots, and your iTunes description – when you're trying to jack your downloads. This is essentially conversion optimization. I think there is also a lot to be said for spacing out your price cycles if you want to hit the top charts as opposed to just getting nice pops here and there.

Bottom line is that I still need to test this more thoroughly, but it's looking pretty causal as opposed to correlated. Some developer friends have seen similar trends when they do it. If you have any insights yourself, please leave a comment or shoot me an email and I'll hook it up.

Keep rocking,

Carter

COMMENTS

  • Tim February 26, 2012

    “Size Matters, Baby” this made me laugh.

  • Mat Cegiela May 6, 2012

    great info Carter, keep it coming.

    Question: How do you find out how many downloads other games had for a time period. I thought that kind of information is hard to come by, but would be really useful for comparisons.

    PS, your ebook rocks! Thanks

  • Carter Thomas Carter May 7, 2012

    Mat,

    There is no clear way to find a number for downloads. All we can do is ballpark it based on a variety of factors. One is reviews – a very loose measure is 1 review for every 1000 downloads. The next is using a program like http://www.applyzer.com/ to see worldwide rankings of a certain app. This will show you where an app stands on every list around the world.

    A recent Indie developer was #21 on the Top Paid Overall charts in the US and said he was getting about 12,000 a day. I’ve heard that the top 25 free overall means you’re getting at least 40,000 a day.

    Oftentimes the best course of action is to just email the developer and ask.

    Hope that helps.

    Carter

  • Kyle Roth January 7, 2013

    Just came across this. Thanks for the great post!

    Question: What steps are required to price cycle your apps? Is it as simple as updating your price in iTunes Connect? Also, are there any potential negative ramifications other than negative reviews on blogs or upset users? For example, any issues with Apple seeing you price cycle often?

  • Carter Thomas Carter Thomas January 9, 2013

    Hey Kyle.

    1. It’s as simple as changing your iTunes connect.
    2. I havent seen much of a negative impact. The biggest being that you’ll want ads in the app when it’s free, so when you make it paid the people who download a paid app will have ads. You can turn them off, but then you’re losing a lot of money on existing users.

    Hope that helps.

    Carter

  • Danny February 4, 2013

    Thanks for the info and insights Carter. I found your post while searching for answer to try and achieve success with our Magazine App on the Apple Newsstand.

    Maybe you can advice but the App is free, the subscription to download the magazine and read issue is not free at the moment, $4.99 per month, $6.99 per issue generally. I am about to go to 99 cents or even free as I have seen other friends start this way and get a help more downloads for the free app and free subscription then I have. I am not sure what to do.

    Danny

  • Carter Thomas Carter Thomas February 4, 2013

    Best thing to do is test each price point and see what happens.

  • Jony February 5, 2013

    Hi Carter,
    How can you sell your game for $0.99 +ads without getting tons of 1 stars ratings and bad reviews?
    I have the same problem, my game was paid since day 1 and i drooped down the price many time, i had over 1.5 m downloads and my biggest concern is to implement ads to my paying users, almost make me feel like a fraud 🙂
    Any thoughts?

  • Carter Thomas Carter Thomas February 15, 2013

    Hey Jony,

    Well, not really 🙂 You may have better luck just releasing a free version of the same game and using ads and not focusing on the 1.5M paying customers.

    Good luck!

    Carter

  • Camilo Aguilar July 1, 2013

    Hey Carter,

    Nice post and thanks for your time doing this to help others. I’ve a question: Does changing the price to in-app purchase would appear on the app store RSS feed too?

    Does anyone have got any experience with this?

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