DragonStyle

Comparing App Store Categories

One of the frustrations that I’ve had with the data from the App Store is the difficulty in comparing the various categories of application on the store. The popularity score appears to be related to the category, so you can’t effectively compare applications across categories. This makes it tough to do things like rank categories.

As I was playing around with the data, however, I thought I’d try to rank the categories by creating a score for the category based upon the simply sum of the popularity of the top 25 most popular applications in each category. My theory is simply that even though you can’t compare across categories, you can see what categories are popular based upon the total (or average) of the most popular applications. The results aren’t that surprising— games and entertainment are overwhelmingly more popular than other categories.

But way to go Finance- cracking the top 5!

Genre	Top 25 Popularity
Games	12.57416165
Entertainment	10.00990161
Utilities	5.601598622
Finance	4.76452379
Photography	3.976679545
Music	3.936911809
Social Networking	3.791524468
Health and Fitness	3.761630667
Lifestyle	3.74729853
News	3.500520549
Sports	3.416063511
Medical	3.376850336
Reference	2.890492635
Productivity	2.622859642
Travel	2.526778971
Books	1.548586185
Weather	1.472607508
Business	1.275677389
Navigation	1.223784489
Education	0.779896454

Category Concentration

One other category related question that I’ve spent some time thinking about is the concentration of applications in a category- specifically whether some categories are dominated by highly popular applications while others have a larger number of moderately popular applications. To get a sense for this- I used the above ‘Top 25 Popularity’ score and calculated what percentage of a category’s total popularity is accounted for by the top applications. Here are the results:

Genre	Concentration
Weather	96%
News	90%
Reference	85%
Travel	84%
Social Networking	83%
Sports	78%
Health and Fitness	75%
Finance	75%
Medical	73%
Navigation	72%
Music	70%
Photography	69%
Lifestyle	65%
Books	64%
Productivity	62%
Business	61%
Utilities	58%
Education	51%
Entertainment	50%
Games	34%

Games and Entertainment are the least concentrated, interestingly- the massive numbers of applications in the category create fragmentation of the popularity. Finance, which as you recall was a top 5 category, is also pretty concentrated- whoever is winning in that category is really winning.

Pricing

Taking a quick look at the latest App Store data, it looks like pricing has actually stabilized in the ballpark of $2.50.

You can download the CSV and do some analysis for yourself.

In other news, I’m going to appear on a panel for MITX tomorrow. I think registration has closed by now, so you’ll just have to wait with bated breath to hear what deep thoughts are covered…

Updated Data from the App Store

For anyone who is interested, here is the latest data (csv) from the App Store, as of this morning. Looks like just over 24,000 applications are currently available.

The most popular premium applications (applications that cost more than $9.99)

IM+ v2.0	Social Networking	SHAPE Services	$9.99
Things	Productivity	Cultured Code	$9.99
Todo	Productivity	Appigo	$9.99
100+ Great Books for Ten Bucks!	Book	BeamItDown Software	$9.99
Lonely Planet Mandarin Phrasebook	Travel	Lonely Planet Publications Pty Ltd	$9.99
Netters Anatomy Flash Cards	Medical	Modality Inc.	$39.99
MLB.com At Bat 2009	Sports	MLB.com	$9.99
iBird Explorer Plus	Reference	Mitch Waite Group	$19.99
ReaddleDocs	Business	Readdle	$9.99
BeejiveIM - Instant Messaging Anywhere	Social Networking	Beejive Inc.	$9.99

 

The most popular inexpensive applications (applications that cost less than $4.99)

Flick Fishing	Games	Freeverse Inc.	$0.99
Touch Scan Pro	Entertainment	Gary Fung	$0.99
Diagnosaurus DDx	Medical	Unbound Medicine Inc.	$0.99
Flight Control	Games	Firemint	$0.99
Amazing X-Ray FX	Entertainment	WebArtisan	$0.99
Night Stand	Utilities	SpoonJuice	$1.99
Pocket God	Entertainment	Bolt Creative	$0.99
Medical Calculator	Medical	MarketWall.com	$0.99
ColorSplash	Photography	Hendrik Kueck	$1.99
Ocarina	Music	Smule	$0.99

App Store Data 3-13-2009

 

 

Lastest CSV available here.

20,000 Applications and Counting

Ok, there are now more than 20,000 applications in the App Store. Amazing.

And to give you a bit of perspective, it took 155 days to get the first 5,000 application. Getting from 15,000 to 20,000 took just 23 days. Getting from 20,000 to 25,000 will now take less than 20. The continued growth, especially now that we’re past the holidays really is staggering.

And in case you’re wondering what the first application in the App Store was, here are the first 10 applications that were available in the App Store.

Date	Name	Genre	Price
5/28/2008	AIM	Social Networking	$0.00
5/29/2008	Evernote	Productivity	$0.00
5/29/2008	nikoli SUDOKU Vol.01	Games	$1.99
5/30/2008	AOL Radio	Music	$0.00
5/30/2008	Bloomberg	Finance	$0.00
5/30/2008	TypePad	Social Networking	$0.00
5/30/2008	Aqua Forest - Powered By Octaveengine Casual	Games	$7.99
5/30/2008	Bomberman Touch - The Legend of Mystic Bomb	Games	$7.99
5/30/2008	Frommers San Francisco	Travel	$9.99
6/2/2008	Photobucket for iPhone	Photography	$0.00

AIM was the first application for the iPhone- amazing.

If you’re curious, take a look for yourself- here is the latest data [.xls file] from this morning. Feel free to use it to do your own analysis, just drop me a line with your results!

The App Store Model Business Model: Lite

Since the beginning, figuring out the right way to monetize applications in the App Store has been confusing. Not only was the marketplace completely new and unlike any other software marketplace, but the App Store still itself was incredibly limiting. In addition, the price for applications trended downward while alternatives like advertising entered the market. The net of it was a lot of experimentation regarding how to make money on applications.

Business Model Emerging

Over the last couple of months, I believe that a business model for paid applications is starting to emerge. Not surprisingly, it looks a lot like the business model that licensed software businesses have been using for a long time (turns out that all those folks had figured something out). That model? Trial versions with paid full versions.

The App Store doesn’t have explicit support for this, unfortunately, but application developers are working around this by introducing ‘Lite’ versions of their applications. Not only are there success stories out there, but the submissions to the store show the increasing popularity of these ‘Lite’ applications. In fact, there are now nearly 1,000 ‘Lite’ applications the App Store, representing about 5% of the total applications.

Looking at the categories, one other very striking thing appears. Application categories that tend to have longer term recurring value (like Games, Business, Finance, Photography, and Productivity) appear to also have the most ‘Lite’ versions.

In some categories, the growth is even more pronounced. For example, in the category of Games, 14% of the applications are ‘Lite’ applications!

But the real evidence of the growing popularity of ‘Lite’ applications (at least among developers submitting applications) is that each month, a growing proportion of the new apps are ‘Lite.’ In February so far, 7% of the new applications are ‘Lite’ applications! And the downward trend of free apps continue as more ‘Lite’ apps hit the store.

 

The Paid Upgrade Problem

So I have to admit it, as a real fan of the App Store and the iPhone, I’m excited to see a business model developing, especially one that may help improve developer’s ability to collect value for their hard work. And while trial versions are a first step, they are only a first step. For though they let users try a new version before buying, and therefore should allow developers to raise their prices, they still permit developers to collect payment for their work only once.

This is a problem mainly because in traditional licensed software, developers keep working on their application, improving it across a number of different versions. And at the companies that I’ve worked for, the (about) yearly upgrades were a big driver of yearly revenue. Without the upgrade revenue, a rational developer should really wonder whether their time spent improving an existing product will really net more users, or whether they should instead spend their time building a new application that they can monetize.

So while ‘Lite’ should help reward developers who create a deep and rich application experience for their users, I’m not sure it goes far enough. To support ongoing development of these deep applications, Apple needs to do more.

What Should Apple Do?

What should Apple do? I think there are a few things that would go a long ways:

1. The most obvious thing that Apple should do is  provide the concept of trial versions right in the App Store. By providing the infrastructure and user experience around this, they can ‘institutionalize’ the concept of trial software, making it a common and well accepting model. They can also save developers the time of having to create and maintain two applications in the store.
2. But Apple also needs to address the upgrade problem. Apple could allow paid upgrades, but this actually ends up being a real mess since it creates a complicated set of versioning issues (for example, once a paid upgrade has been created, do bugs still get fixed in the old version?).
3. Apple could also enable the concept of ‘subscriptions’ to software, enabling developers to charge something like $.99/month, making it possible to collect longer term revenue for highly valuable applications.

It seems clear that enabling trialing natively is a no brainer for the App Store. Will Apple step up? And could they surprise us by doing even more? We’ll have to wait and see, the App Store remains a young marketplace and each month we all learn something new.

[CSV file of supporting data]

There’s an App For That

You probably have seen the ads highlighting the App Store- ‘There’s an App for That.’ I’ve seen a ton of them, and one of the greatest things about them is that they aren’t lying. There really is an app for that.

There are now more than 17,000 applications available in the App Store. 17,706 to be precise. Each day, iPhone users can choose among 15 new games, 7 new utilities, 9 new entertainment applications, or 3 new productivity applications. 73 new applications appear in the App Store every day.

Want to track your finances? Mint.com. Need to lose some weight? Lose It! Like to shop for deals? WootWatch. Bored? Slotz. Like to work out? Runkeeper. Need to have dinner delivered? GrubHub. There are apps for just about everything.

Total # of Apps in the App Store

 

# of Apps submitted each day

 

Categories

Looking at the applications in the store, it is clear that the iPhone is an entertainment device. Games and Entertainment application make up more than a third of the applications in the store and typically dominate the top 100 applications in the store. In fact, Games and Entertainment make up nearly 50% of the most popular applications in the store. 

Distribution of Applications by Category

 

Category trend – % of application in each category each month

 

Growth of the top 5 categories

 

Pricing

While the low price approach of the App Store has continued, I think that the new headline should be ‘99 cents is the new free.’ The downward price trend continues, but most interestingly, but the percentage of applications that are free continues to decline. In fact, soon only 1 in 5 applications in the App Store will be free.

Average price of an application by month

 

Distribution of Applications by Price

 

Paid vs. Free App by Month

 

# of Applications by price over time

 

Summary

New SmartPhones (G1, Storm, Pre, etc…) are showing up pretty regularly now. They’re still working on catching the iPhone as far as its integration and slick user experience. The fact that the App Store is continuing to grow at such a torrid pace is bad news for these competitors. Because each new application is a potential reason for a customer to choose the iPhone and each new customer is a reason for a developer to build an application for the iPhone. This virtuous circle is creating tremendous advantage for the iPhone- it’ll make it incredibly difficult to catch Apple, once again.

 

If you’re interested in doing some analysis yourself, here is my latest raw data (csv).

Windows Live Writer 2009

Windows Live Writer 2009 has officially shipped, and it is just great. I am a huge fan, to the extent that I run VMWare on my Macbook just so I can use Writer. If you are blogging regularly and you haven’t tried Writer, you really should- it really makes just about every aspect of writing new posts better.

Read all about the new features here.

Congrats to the whole Writer team on a great new release.

App Store Raw Data

For those that are interested, here is recent (well actually, today’s) CSV file with the raw data that I’ve been using to look more closely at the App Store. Feel free to use it for good.

If you do decide to blog about something interesting that you’ve found in analyzing the data, it would be great if you could give me a little shout out/link and also if you could let me know so I can benefit from what you’ve learned!

One Last Note on Trends

Prompted by Nate’s comment, here are a couple more looks at application trends on the app Store. First, if you have a look at the distribution of applications by price over time, you can see the rise of $.99 and $1.99 apps, along with the corresponding fall in free applications. Applications priced $4.99-$9.99 also see a decline, while most other prices are essentially stable.

 

Interestingly, with just a couple of exceptions, the distribution of categories appears to be stabilizing a bit, at least for the top genres. Games represent about a quarter of the applications in the store. The big mover appears to be medical, which has grown to more than 5% of the apps in the store.

And in a final note- the growth of the apps in the store continues to be steep- closing on 12,000 applications…

Down and To the Right By Design

If you’re looking for market feedback on the value of applications, here it is. Using updated data to take a look a pricing trends confirms what I think everyone already knows. Each month, the average price of apps on the store just declines. For example, have a look at the average price of applications (excluding medical applications, whose high prices skew the results).

An average application price that was once nearly $4 has fallen to nearly $2.25. It’s too early to tell, but it certainly doesn’t look like we’ve hit bottom yet, either.

Games

If you look at games, the downward trend is much more dramatic, but prices appear to have stabilized at just under 2 bucks an application. This, of course, begs the question- games are the most popular application in the store, is this because they’re cheap? Or is this really the best we can hope for- that the most popular category of applications on the store is perceived as being worth about $1.50 an application?

Health and Fitness

Health and Fitness is one of the few categories that appears to be reversing this trend. After an initial price drop, this category has seen average prices rise nearly every month, now approaching $3 an application. And it does make sense- after all health and fitness applications are likely to impact your life much more significantly than a game.

 

Why Are Prices Headed Down?

Why the downward trend overall? There are a lot of factors.

1. Buyers of consumer mobile applications were already used to paying $5-7 for applications. This set a relatively low ceiling for applications targeted at consumers (who are the main buyer of iPhones).
2. The inability to trial software means that users have to take a risk that they don’t like the software. This risk has to be priced into the software, reducing the price that can be charged.
3. The large number of relatively simplistic and useless applications on the store increase the perceived risk when purchasing software. This increased risk of disappointment forces prices down further.
4. Of course for many applications (lighters, flashlights, geiger counters) there are large number of substitute goods. This drives prices down. (And while we’re on the subject, do these developers call each other in the morning and decide which sort of annoying application they’re going to build today? How is it that 5 geiger counter applications manage to show up on the same day?!)

There is No End in Site

But the real problem here isn’t that customers like cheap applications. It’s that the way the store is structured today is creating a vicious circle of downward spiraling prices. As pricing pressure forces applications to be less expensive, developers need to respond by reducing their investment in the applications (to make them profitable). This in turn reduces the value of the applications, continuing to increase price pressure. Without some kind of change, I’m not sure where the pricing stops.

A couple of suggestions

1. Let developers get recurring revenue by charging for upgrades or selling subscriptions. This breaks the cycle by allowing developers to profit from further investment, leaving initial prices low, but increasing revenue from satisfied users who continue to use the application.
2. Grow the user base fast enough that some companies can be profitable even selling something for $.99. Of course, when the price pressure forces the price below $.99, then what?

Or maybe, this is by design. After all, Apple stands to make 30% of the total app sales, and they don’t need to applications to be expensive. In fact, when you consider that they make money on the app transaction, but also that each new application adds value to the iPhone platform, more apps (even if they’re cheap) is probably better for Apple.

A Closer Look at App Store Category Growth

Taking a closer look at the growth rate of various categories confirms what everyone already knows- games are the high growth area of the App Store. There are a couple of interesting things that can be learned from the category trends, however.

The below is a look at the most common application categories and their growth rate.

 

1) Although the Utilities category was initially a high growth category, it’s growth is actually relatively flat. Entertainment applications have surpassed Utilities as the second most common type of application on the store.

2) The Education category is growing incredibly rapidly, taking fourth place in November. If it continues to grow at its current rate, it will soon be the third most common category of application in the store.

The below is a look at the least common categories and their growth rates. Healthcare & Fitness is the big winner here…

Apps for a Song

If you take a look at the growth rates of the App Store by price, something that you may have already intuitively known starts to become clear. $.99 has become the default price of applications on the store. In face, more than 1 in 3 of the applications on the store now cost $.99.

And the trend looks to be accelerating. The graph below illustrates the growth of various price points, and $.99 is outpacing every other price, including free. Seems everyone thinks they can make a buck on the App Store (well, 70 cents).

Of course, one of the very interesting things about settling on $.99 is the fact that this is also the base unit of measure in the rest of iTunes, where songs cost $.99. Are we trending toward a store that sells primarily applications in the same way it sells songs? And if so, what does that imply about how applications will look, how complex they will be, and their longevity? After all, the music business is largely a hits business (at least it used to be, now who knows what kind of business it is). And I guess the app business is likely to look the same…

It’s True - 10,000 Applications

For those waiting for my official acknowledgement, the App Store now has more than 10,000 applications available. Congrats!

Can Anyone Explain This?

I’ve been using Outbrain on my blog for a few weeks and I’ve been generally very happy with it. It is well integrated, visually attractive, and provides a real value in the ability to see reader’s ratings of my posts. It also usually does a pretty good job at making recommendations, but as I was replying to a comment on a post about the iPhone, I noticed the following recommendations.

 

WTF? Real Muscle Online? I’m not sure I get how that is likely to apply...

10,000 Applications?

In my last post, I reviewed a bunch of data about the applications on the App Store, and that pointed to more than 9,000 applications on the store. Now, word is out that the App Store has crossed 10,000 applications. So, I did a quick refresh of my data, and looks to me like the store is still a bit short of 10,000 with 9,774 applications actually active in the store.

My utility literally crawls the iTunes store to find out the applications, so I have faith that the data I have is accurate. So I’m not sure what accounts for the discrepancy in the numbers. Could be applications that were approved and then taken down. Could be applications that were taken down voluntarily by the application developers. Either way, looks to me like we’re still a couple days away from having 10,000 active applications.

Edit: Note that the folks at AppSherpa offer the following clarifying note, confirming my suspicion:

What these sites are not accounting for is that many applications, after being listed on the iTunes store, have either been pulled by Apple, or the developer. So, while it is true that 10,000 apps have been released, it is not true that 10,000 Apps currently available to download.

Well played, AppSherpa.