On Tuesday, January 8thth, the Wall Street Journal reported that Apple was working on a cheap iPhone for release later this year. Immediately, the Internet was ablaze with “will they, or won’t they” speculation. Two days later, on January 10thth, Reuters cited Apple Marketing Chief, Phil Schiller, in an interview given to the Shanghai Evening News, as saying that developing cheaper smartphones was not a direction Apple was pursuing. However, by the next day, the Shanghai Evening News had changed its report, causing Reuters to publish a retraction. The amended report eliminated references to a cheaper smartphone. Of course, this just added fuel to the already well-stoked fire, and resulted a hotter debate on the Internet.
Does this mean that Apple needs to sell more iPhones, despite posting a record-breaking quarter, and investors still want more?
There is no doubt that dropping prices on iPhone and iPad apps drastically improves revenue and download volumes, according to one study. Developers can gain a revenue increase of 159% in a week with price changes on iPhone apps, mobile app analytics firm Distimo reports.
Price cuts have a greater effect on iPhone software, with average downloads growing by 1665% in a five-day span. For iPads, downloads increased by 871%. Developers can see an impact in a short period of time. Distimo’s study shows that in just three days, an increase is already visible. And the positive effect is lasting: the longer the sale, the larger the revenue growth.
“There is a two-fold explanation for this lagged revenue growth effect: either an increase in income from one-off fees or an increase in income generated by in-app purchases,” the company explains in its report.
Not surprisingly, the spike in interest is cut short when app costs rise. Downloads drop by -57% for iPad apps and -46% for the iPhone.
The report showed 850 unique iPhone applications and 930 iPad applications changing costs at least once in December, and their price changes fell within a $1 to $3 range.
Apple’s app store continues to grow at a steady rate, with increased revenue in the fourth quarter of 2012. Developers can follow suit by discounting prices, since its payoffs are far reaching. The same results were found for applications in Google Play, though not to the same extent of iOS App Store.
If Apple is researching on the cheaper iPhone which focuses on the China market, investors could still get more by expanding the China market.
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