Switching Decision, Timing, and App Performance: An Empirical Analysis of Mobile App Developers’ Switching Behavior Between Monetarization Strategies

Mobile application developers switch their monetarization strategies (between paid and free) for strategic purposes. We investigate the determinants and consequences of app developers’ switching behavior between paid and free strategies over time. Using large-scale daily app rank data from the iOS App Store in 2011, our estimations of simultaneous equations reveal that the prior performance of an app and its duration of staying in a monetarization strategy significantly impact the developers’ decision of switching. We also find that better performing apps tend to have longer stays in the paid strategy, whereas developers tend to switch their monetization strategy to free (ad-supported) when the performance of a paid app declines. Finally, app developers’ switching behavior and duration of the app in each strategy have significant effects on the subsequent app performance in the App Store. Implications on strategic moves by app developers towards higher app performance on app platforms are provided.