Revenue models, in-app purchase, and the app performance: Evidence from Apple's App Store and Google Play

The effect of revenue models on app performance depends on the app store.The effect of in-app purchase on app performance depends on the app store.Paid, freemium and in-purchase models are shown to be effective in app store.Freemium and in-app purchase models are shown to be less effective in Google Play.App category influences the effects of both revenue models and in-app purchase. In this paper, we empirically examine how the revenue model (paid, free, or freemium) adopted for a given app affects the app revenue performance as measured by the app daily revenue rank. We also study the impact of in-app purchase on this measure of performance. Moreover, we study how such relationships are contingent upon the distribution platform where the app is marketed as well as the type of category to which the app belongs. We test our hypotheses relying on a large sample of top grossing apps from the two major app stores, namely Apple's App Store and Google Play. Our findings reveal that in the Apple's App Store, paid and freemium models are equivalent and both are more effective than the free model in terms of app revenue performance. On the other hand, in Google Play no significant differences between paid and free revenue models emerge, whereas the freemium model is shown to be less effective even than the free model. Moreover, while in-app purchase is shown to positively influence the app revenue performance in Apple's App Store, this effect is reversed in Google Play. Finally, the type of category is also shown to influence the effects of the revenue model and in-app purchase (the latter to a lesser extent) on the app performance.

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