There may be more than 20,000 iPhone apps out there that have been downloaded more than 500 million times, but what is the average shelf life of each app? Greg Yardley, CEO of Pinch Media, offers some stats based on the 30 million+ downloads his iPhone app analytics startup has kept tabs on. One of the most telling slides in a recent presentation he gave shows the drop-off rate in iPhone app usage (see above; entire slide presentation embedded below). For free applications, only about 20 percent of users return to use the app the first day after they download it, and then it quickly drops off from there. By 30 days out, less than 5 percent are using the app. The chart for paid apps shows a slightly steeper fall-off rate. So there is a very brief window of time to capture people’s attention and potential revenues.
The key insight of the presentation is derived from this data. Because it answers the eternal question that all iPhone developers have: Should my app be free or should I charge for it? For all but the most successful apps, the free route does not make much sense because ther eis not enough time to recoup the costs of developing the app from advertising.
Free apps tend to be run 6.6 times more often than paid apps, but even with that increased usage, it is not enough to make more money. Yardley offers some quick math. The average paid app returns $0.70/user. The average free app is run 80 sessions. In order to earn the same as a paid app on a per user basis, the free app would have to command an $8.75 CPM (cost per thousand ad impressions). But most iPhone app ad rates are in the $0.50 to $2.00 range. That is assuming on ad per session. The other option is to bombard users with more ads, which might scare them away.
Yardley estimates that less than 5 percent of all apps woul dmake more money right now with advertising than charging for paid downloads. His advice: “Unless there is something inherent about the app that screams free, sell it.”
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“Should my app be free or should I charge for it? For all but the most successful apps, the free route does not make much sense because there is not enough time to recoup the costs of developing the app from advertising.”
This goes for most of the free “TechCrunch Business Model” web startups as well. LOL.
True, it’ll just be a small return for those doing free apps. But, I guess you become more popular with users, so your next app might get more exposure. I believe there is a short and long term view with these earnings.
TechFilipino
Perhaps, since apps like iFart are pretty popular, it might make sense to tease apart the statistics for “real” apps versus “junk” apps?
Entertainment is “real”. Nothing junk about it. People pay big dollars for entertainment value.
There is a crucial dimension of paid-vs-free that is completely ignored in this analysis, or at least TechCrunch’s abstract of it: a huge percentage of free apps would not be downloaded at anywhere near the rate they are if the same app was not free.
yes.
That’s in the model (and the slide deck) - average free-to-paid usage is 6.6 to 1.
I do suggest that for certain applications dependent on network effects (social networking’s an obvious example), the ratio’s going to be more favorable and the ad-supported model’s going to work better.
Best,
Greg
Really interesting information. I would have never guessed that the apps were used so infrequently.
I still use Shazam, Loopt and Facebook quite often.
I use facebook, fring and ireddit. That is pretty much it, everything else I use a few times and delete or forget about it.
I should clean up my iphone desktop now that I think about it. Lots of unused apps.
Isn’t that the basic nature of any “try before you buy” software package?
I would have felt ripped-off had I had to cough up cash for some of the stupid apps I downloaded for “giggles and grins”.
How often do you get an opportunity to use Sound Grenade?
I don’t see how this is surprising. I agree with Paul on this one.
http://tr.im/gk8j
This gives hope that new apps won’t get buried in the mass of older apps in the catalog.
If users search for currently popular apps, just about all of the older stuff would have fall off within a month of launch.
To me this just says: “most iPhone apps suck”. Which will surprise no one given how fast people are pumping out these things. As they improve though, and the market matures and gets more competitive, the business models will mature as well.
Advising people to charge for poor apps though seems like bad advice. How about advising devs to create an app that people actually use more than a couple times?
I work for Flurry, a free iPhone Analytics provider and have been in product mgmt / mktg for ~ 14 years, over five in mobile games and applications. I think looking at an average length of use is interesting, but what is more important is the commitment to improving an application to drive user retention and adoption through cross-selling, viral features, etc. I agree with Paul that free lite applications (aka trial or demo) are driving average use sessions down. But remember, people are on a mobile phone, using apps and games during “wait states” and many of the apps are novelty apps, not really full featured ones. At the end of the day, the key is to offer something of value, track user behavior and iterate so your application isn’t one of the 30 second apps.
Nice to hear from you Peter - Flurry looks great.
I helped Greg & the Pinch team out with the presentation and one of the things that really surprised me about the data was the length of time people were spending engaging with their devices.
While it didn’t completely carry over into his deck Greg talked about how brands are recognizing the value of this audience - one which is distinct from those simply in a ‘wait state.’ And thus we are seeing more branded experiences in this space.
I think the only app that I can’t live without these days is the analytics app. I’m in it anytime I am not at my computer checking my visits, conversions, etc.
The key is just to find the apps you’re really interested in. Most apps don’t have a shelf life of 30 days because most of us just want to try something for the fun of it. I don’t think it is a bad thing, that is just the way it is.
I think that thinking about iPhone apps as standalone moneymakers is perhaps the wrong approach.
Maybe we should be designing them as mobile services ‘brought to you’ by a brand instead of trying to build quickie revenue streams.
If companies can charge for them upfront and people are willing to buy…that’s great. If they don’t add to the bottom line but provide a better customer experience…even better.
I think one of the greatest issues is still search. Their is an overwhelming number of apps and it is still difficult to find the ones that would actually work best for you. Once they are off that 30 day “new” list they are doomed…even if they are a quality app. The turn over of apps is just too high.
I’m astonished at the arrogance displayed by a company that can tell how many times customers “return to an app” - this is quite clearly nonsense.
I download an app from the store and run it locally on my iPod Touch. There is no way that this company can tell how often I run it or when I get tired of it.
They can perhaps tell how many *new* people look at it on the store, but thats a completely different statistic - which has been discussed elsewhere. You don’t get to spend forever in the spotlight.
But there is just no way whatsoever that these people can deliver anything other than speculation on how long people *use* most applications (with the exception of those that require web connectivity, and in that case, I’d be hollering about privacy, etc at the servers in question).
The study does not mention the lack of multi-tasking support in the iPhone OS, and how much that has contributed to an app’s inability to engage the user. I’d suggest that we revisit the analysis after the iPhone OS comes up with multi-tasking support in the SDK, and apps begin to exploit that feature.
Developer places a tracking link via image in loading screen / what not. You can absolutely track how many times that images is loaded over time. It’s old school but works.
Sort of like a blog…
The real usefulness of any iPhone app is gaining and audience to start conversations with.
That’s where the money is in social media.
there is money in social media?
Interesting, but only relevant if the market has been fully penetrated. But if there are a constant flux of new users then the revenue stream will continue forever. Many marketing budgets focus strictly on new user acquisition because they know retention will be difficult.
Now if the addressable market is finite, then there’s a problem but I see no mention of that.
Two comments. One is that while the data provides some valuable insight into the efficacy (or lack thereof) of ad support for most applications, what it doesn’t speak to is the integral-ness of free ‘lite’ versions in driving users to upsell themselves to the premium ‘full’ version of the app.
This is standard practice in the App Store universe and there is a lot of data that supports the marketing value of lite version/full version as a (paying) customer acquisition strategy.
The other thing that this data doesn’t speak to is the value of App Store as a distribution/monetization strategy for app builders relative to other channels.
My friends in the iPhone Developer universe that sell/sold their products through retail and other channels consider the iPhone App Store model to be manna from heaven in terms of margin, reach and control. To be clear, an imperfect channel, as all things are, but manna nonetheless.
I blogged on this topic in a post called:
Surplus, Scarcity and the iPhone App Store
http://bit.ly/AOHou
Check it out if interested.
Mark
Mark –
We’ve been looking very carefully at transitions from ‘paid application only’ to ‘paid application supplemented by a lite or free version’ to try and verify that this strategy works.
Things look directionally positive, but we need more data. Since the ‘lite’ version simultaneously drives more paid sales from upsells and cannibalizes them by giving people a free alternative to their impulse buys, I won’t recommend it in a slide deck until I’m 100% sure my advice isn’t going to hurt developers.
Agreed that the AppStore is incredible. Didn’t put that in the deck because I thought it was a given - but reflecting, your point’s well taken.
Best,
Greg
Thanks for the added context, Greg. We all have biases so tend to parse from the details data that supports our pre-disposed conclusions.
Arguably, most people get the value of the App Store in the abstract but don’t grok the power of the wireless impulse buy, download, use workflow, and how the whole iPhone/iPod touch experience plus wireless iTunes pattern recognition trains people to make smallish transactions without thinking too much about it.
Even less, grok the fundamental power of tie in to the platform play vis-a-vis the dev tools.
They just see a feature that Android, MS, BB and Palm will need to emulate. I think that when Apple finally starts talking dollars driven by App Store, there will be a big AHA.
Cheers,
Mark
Jeff has a very valid point!
Besides, the main reason mobile apps arent used more is that most apps arent really designed for long time usage and most are just show-off fun apps. If you want to have a successfull stand-alone mobile app, ask yourself, what makes me sit in front of a desktop or a console for hours?
People need to view the mobile phone as a PC with different interaktionmethods than the desktop or laptop. But with the same capabilities (that is, if battery lifetime wasnt an issue as well as bandwidth/network quality for stuff like streaming video).
Free can pay! there’s a maths oversight here - this completely ignores that a free App will be downloaded many more times than a paid App so that ‘breakeven CPM rate’ is meaninless. If a free App gets 10x or 100x more downloads than a paid App that ‘breakeven even CPM’ falls to $0.875 or $0.08
No math oversight. The average ratio of free to paid usage is on slide 22, and of course this is baked into the model.
That said, I agree with you - free *can* pay. However, free only pays better than selling your application in special cases.
Best,
Greg
I d not know where these CPM rates come from but surely not from adMob. Just checked: on average the CPM rate is $ 6.19 for last month.
@Jeff You might think they don’t know but they do. You got wifi on your pod? The apps send usage info to the analytics server just like websites you visit.
A couple of things –
Admittedly CPM rate evidence is anecdotal, but we’ve collected it from a lot of different developers, and it does include a large number using AdMob. After the tech meetup where I initially presented these slides, for example, a developer came up to me and told me his CPM from them had dropped to $0.38.
Next, any CPM calculation has to take fill rate into account. I’ve seen mobile campaigns paying over $10.00 CPM - but if they don’t run on 100% of the inventory, your true CPM is less than $10.00. A fill rate of 25% on a CPM of $10.00 is an effective CPM of $2.50.
Finally, on slide 25 I mention factors that can affect the proceeds gained from advertising. Every application is different. While we’ve presented averages here, you should plot your own sessions per user curve over time and do your own math.
Best,
Greg
Greg,
Thanks for the elaborate answer. You are right, one should take into account the effective CPM. I took this for granted. The amount mentioned is just that; the effective CPM. I’m sorry for the developer you talked to, and I do not know why his CPM is so low, but I wonder if it might have been a little overdrawn. Probably the fill rates and CPM was much higher before Q4 08 and the amount he or she mentioned was to illustrate this. I’m just very surprised about your findings.
And isn’t there a Long Tail factor in this?
Thanks,
Maarten
The solution is that app developers need to take the “assets” used to create iPhone apps and write apps that can run on the over one billion feature phones that can run apps. (The number of feature phones sold each week exceeds the number of iPhones sold every!) Using Nemo available free at http://www.everypoint.com/ developers can realize the benefit of “Write once, run anywhere.” It’s simply good business.
The solution for iPhone app developers is simple: After completing your iPhone app, take your assets and create the same app using Nemo available free to qualified developers at http://www.everypoint.com/ This second app will run on over 1 billion feature phones already in people’s hands. Finally, “Write once, run anywhere” is here. Yes, the iPhone is great. But the available market is tiny when compared with feature phones; more feature phones are sold each week than the number of iPhones sold in the last 18 months! Check it out.
One ad per session given the typical session length of 7 minutes falling to 4 minutes over time seems VERY low. If I am using an app for 4 minutes, I am likely clicking through to a new screen every 10-30 seconds. Even on a static screen app (ie, a game or similar) having a 30 second rotation for a mobile ad that is floating is fairly reasonable. That gives you around 8 impressions per session, or on 80 sessions, 640 impressions. Given that the time spent starts around 7 minutes it’s really more like 800-900 impressions. Be conservative and cut your rotation rate to once per minute and you still have around 400-500 impressions over the lifetime of a user to monetize on. At a $2 CPM that is $0.80 on the 400 impressions count.
So it’s all going to come down to how well you integrate ads into the app, but at a 4-5 minute session length only getting one impression out of the user seems remarkably low.
Excellent original presentation (thanks, Greg!), and insightful comments all.
My take as a newly-registered iPhone app developer is to first approach the device as a consumer of the app store offerings, which i download onto my iPod Touch.
In talking about the fall-off rate, one thing that Greg did not mention is that there are a limited number of app “slots” available to install apps into - 144 total ( nine screens of 16 icons each), the first screen of which is almost taken up with the included Apple supplied apps. I don’t have an iPhone, so I don’t know if the number of included apps may be even larger for that device. I’m guessing probably.
Which means, if I want to explore more than that total number, I have to delete some apps once all the slots are filled. I reached this state within a couple of weeks of purchasing my iPod and downloading all the free games and utils I could find. After running each of these apps, I would delete them to make more room for further downloads if they proved too difficult or too useless for my tastes.
So it does not surprise me that most apps would not be revisited after the first day or week, given these circumstances. Only the most fun or useful apps would stay on board. At some point, I think Apple is going to have to increase or remove this limit. I know I already don’t like it.
I.e. if you want to buy iPhone app, DON’T, because you won’t use it anyway after few days.
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