The Impact of Large Scale Promotions on the Sales and Ratings of Mobile Apps: Evidence from Apple's App Store

Abstract

We study four promotions offered on Apple's mobile app store that vary in user exposure, price discount and redemption procedure. We find that promotions that are full-price discounted and digital (i.e., the redemption procedure is a few taps on the smartphone) are the ones that cause the largest increase in downloads. Investigating the effect on ratings, we find neutral or positive effects on the ratings for all full-price discounted promotions but negative short-term effects on the ratings of apps promoted by substantial, but only partial, price discounts. Furthermore, we find that high barrier promotions induce a rich-get-richer effects, with apps that were popular before the promotion receiving, generally, larger benefits. In contrast, low barrier promotions cause, on average, the same increase in sales for all participating apps regardless their characteristics or their previous popularity. Finally, we explore the effect of these promotions on the competition of the featured apps and find negative externalities when the promotion is low barrier and positive when it's high barrier.