A case study in Free vs. Paid and the value of advertising

http://www.iphonedevsdk.com/forum/business-legal-app-store/33482-case-study-free-vs-paid-value-advertising.html

My most popular iPhone application, Fake-A-Call, has a long and I think interesting history... Although this may seem like shameless self-promotion (and hey, I do hope some of you forum members check out the free version... ), I think it's a story worth telling.

I developed Fake-A-Call over a year ago. It is one of those 'fake calling' applications where it makes your iPhone ring as if someone is calling you. I think I was second or third to market with this type of app. I priced it at 0.99$ for a day or so, got no sales and then switched the priced to free and submitted an update adding banner ads.

To my surprise the app took off once I switched it to free. It rose up the category list and soon the top 100 free list, topping out somewhere around 11 or 12 I think. For awhile this was making me over $250 a day and I was quite pleased by it, but I kept seeing my competitors app in the Top PAID section, and I was pretty sure to be in that position he would have to be selling way more than 200 apps/day... Greediness got the better of me and I ended up removing the ads from Fake-A-Call and changing the price to 1$ to cash out! Also influencing my decision at the time was a weak performance of my advertising company.. Fill rate was often below 60% and the eCPMs were nothing special..

So I changed to paid and made slightly more money than I was running ads for a couple weeks, but not the giant gains I was hoping. My competitors app seemed to have a solid position and it was hard to directly compete, so I changed categories and that helped out some too. Over the course of several more months though revenue began to decline as happens to most paid apps..

I introduced a free with ads version again with limited functionality, 'Fake-A-Call Free' (The functionality was the same as when Fake-A-Call was originally free). This was marginally popular, but nowhere near as popular as it had been. On a normal day I've been getting around 30-40 sales of Fake-A-Call and 500-700 sales of Fake-A-Call free. A respectable amount, but a shadow of it's former self.

I've been focusing on other things lately, but I thought I'd try one last effort to try and propel Fake-A-Call above it's competitors. Last week an update was approved adding all the features of Fake-A-Call to Fake-A-Call Free, the only difference between the two now are the displaying of ads. I think this makes my app the best free fake calling app out there, but to prove it I need to rise above my competitors in the rankings and stay there. To provide the boost, I spent $1500 displaying ads for Fake-A-Call Free yesterday, and will spend an additional $1000 displaying ads today, hoping this is enough to drive my ranking up the Utilities list (and hopefully staying there)! I started around 80 I think.. currently I'm at #34 while my competitors are at #24 and #12... I may not be able to catch up, but if I can sustain my current position I think it will have been worth it... if not, I'll know to focus my time on improvements or other apps.

Anyways, if you got this far thanks for reading If you have any suggestions/comments/questions I'd love to hear them. I know I didn't play this one right at all... my biggest regret is not creating a 'premium' version instead of changing Fake-A-Call to paid and making a new free version... I lost a nearly 1.5 million ad viewing base by doing that!