Sunday, June 13, 2010

Optimising e-Commerce in the iOS App Store

It would seem to be potentially useful to report some experience as to what works in publishing books and magazines through the iTunes app store. Exact Editions has been offering iPhone app access for magazines with Exactly for over a year and we believe that there are some lessons that can be drawn and shared (without either revealing trade secrets or breaching the confidence of our publishers -- who own the sales data that we collect on their behalf). This picture tells a story:

This diagram plots the Sales line for a magazine app (Blue) against the number of downloads of the Freemium app (Green) on a daily basis over a couple of months. A number of lessons can be drawn from this graph and the underlying data:

  1. The 'freemium' approach works. A magazine/book publisher who makes freemium apps showcasing the content of the publication, and who uses the in-app subscription service supported by Apple, will have effective distribution of sample content and will make sales of that content.
  2. Clearly, the sales lag the free downloads -- but not by much. One has to get potential users to sample the stuff before they buy, but the sales are likely to come in the next day or two. We haven't yet done detailed regression analysis on this, but the overall trend is clear (and our boffins are now closeted with powerful non-linear, non-parametric, least squared soonest mended black boxes).
  3. The spikes in the data are strongly linked to the introduction of the iPad, first in the USA though this app didn't quite make it into the app store in time for the launch, and second at the end of May in Europe. Further the sales are more strongly linked to the second surge in free downloads, which tells us that this publication has a mostly European (rather than American) audience.
  4. So far all the publications that we have introduced to the app store have had an acceptable uptake of samples. They are all clearly going to have at least several thousand trial installations. But there is a high degree of variability, and we do not know what makes the difference between a magazine app getting 10s of thousands of downloads in the first week or two and another magazine app getting a few thousand free installations. We suspect that prominent promotion by the publisher makes quite a difference, but it is certainly not the only factor.
  5. Our statistical analysis has shown that iPad owners are much more likely to download magazine and book apps than iPhone users, and they are more likely to buy subscriptions to them. The extent to which uptake has been weighted to the iPad has really surprised us. Since the iPad was launched we have seen more sampling from iPad owners and more purchasing from them also. The majority of downloads and sales has been going to the 2 million iPad owners, not to the 70 million iPhone/iPod Touch owners. This disparity has really astonished us and several of our magazines have seen the sales ratio going in favour of the iPad in the ratio 80:20. Other sources have reported that the iPad is very strong for reading and very strong for selling books and magazines. The potential of the iPad for publishers and the reading public has been sensed, but it has still not been fully grasped. Many magazine publishers still do not have a clear idea of what an iPad/iPhone app is or how it can work to drive subscriptions.
  6. Different books and magazines obviously have different 'conversion' rates. We will not speak about these in detail, but we have seen that magazines and books exhibit a fairly reliable consistency in their conversion rate. More installations of the freemium app will lead to more sales, and this allows the publisher to assess the value and effectiveness of their promotion activity. The conversion rates may appear to be somewhat low to the 'outsider', and we regard 1-2% as acceptable, 3-4% as good, but this is telling us that publishers should recognize that the app store is a great medium for having stuff sampled and evaluated, and there will be a lot of sipping and tasting without commitment or follow through. But you will be able to measure it.
  7. Price makes a huge difference to uptake. If you publish an app with an in-app subscription price of £15/$20 you may get less than 3 in 1,000 samplers buying the app, however good the trial experience is!
  8. We have not yet found an optimum ratio for free:closed in offering customers samples of the full content that will be available to them -- there are signs that a more open approach (over 20% a publication being open) maybe more effective than a 'tight' grasp of content. Perhaps this is related to the fact that there will generally be a lot of sampling going on, so having a slightly more convincing 'free' offer may in fact convince and convert.
  9. Since Exact Editions, not Apple or the publisher, carries the 'cost' of sampling (Apple does not pay the server bills or handle the support) it is in Exact Editions interests for the conversion rate to be optimum and high!
  10. The renewal rates on subscriptions are encouraging, but this is one area where the publishers and Exact Editions suffer from not having much, or any, access to customer information (Apple hold all this customer identity very tight). Since it is very much in Apple's interests for subscription renewal rates to be as high as possible (publishers and developers are aligned with Apple in this) it is more than likely that Apple will find it in its own interests to be more forthcoming with publishers and developers about this data.
  11. Customers like these apps and we are getting very positive support messages from satisfied purchasers. Many customers also see the potential of this technology and are recommending that we further develop the apps in ways which will improve them. We agree with this assessment and often find that the specific recommendations are sound.
The most surprising outcome of our analysis has been the huge significance of the iPad. iPad owners are discovering the potential of this device much faster than publishers.

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