The Impact of App Revenue Model Choices for App Revenues : A Study of Apps Since Their Initial App Store Launch

When launching a new app in one of the major app stores, the developer must decide how to generate revenues from that app. The decision includes whether to charge an upfront payment from the customer or make it free to download and whether to include in-app payments. In this study, we analysed the effect of these decisions on the amount of revenue an app generates and if it differs for gaming (hedonic value-orientation) and productivity (utilitarian value-orientation) apps. To analyse this effect, we used approximately two years of mobile app panel data from 330 newly launched US Apple App Store gaming and productivity apps. Based on random effects regression analysis, we report that free downloads combined with in-app payments are superior in revenue generation for gaming apps. By contrast, for productivity apps, relying only on either upfront payment for the app or on in-app payments generates the highest revenues. For gaming app developers, offering free to download apps is thus recommended. For productivity app developers, charging for either downloading or in-app features is more successful. This study complements existing literature by investigating revenue generation of new apps and the performance effect of specific revenue model options that developers must make in app store settings.open access