Impact of Free App Promotion on Future Sales: A Case Study on Amazon Appstore

Abstract

Amazon’s Free App of the Day program, aimed at improving app visibility using daily free promotions, is a compelling experiment in the ‘economics of free’. In this study, we investigate the longer-term consequences of free app promotions on the performance of apps on Amazon Appstore. In particular, we quantify the causal impact of such promotions on apps’ future download volumes, star ratings, and sales rank using a multi-level model. On average, apps see a surge in download volumes during such promotions, albeit accompanied by a short-term negative effect on its star ratings. On average, sales rank briefly improves but falls to pre-promotion levels within a few months. Interestingly, our findings suggest that lower ranked apps are the biggest beneficiaries of these promotions, as they witness the most significant sales impact. In addition, we show the presence of a cross-market spillover effect of such promotions on the performance of the same apps on Google Playstore. Our results underscore a nuanced set of trade-offs for an app developer: do the benefits of running a promotion and boosting ones’ sales rank warrant the lost revenue and risk of lower user ratings in the long run?

Keywords: promotion, mobile apps, marketing analytics, Amazon, Google, Android, electronic commerce

JEL Classification: C3, D2, D4