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The results are in. Analytics software firm Pinch Media has released perhaps the most detailed stats on iPhone application usage to date based on over 30 million downloads its tracked.
For iPhone developers, the results are clear: Paid apps have an immediate payback, while the ad-supported model takes longer and generally relies on repeat users.
"I used to be much more enthusiastic about ads than I am today," said Greg Yardley, Co-founder and CEO of Pinch Media. He said the aggregated data is based on "a few hundred" iPhone applications that Pinch Media's analytics installed.
In a blog post titled 'AppStore Secrets', Yardley said in most cases, an iPhone developer would have to "bombard the user with advertising" to match the amount a paid application brings in. An exception would be more niche applications or services that can command higher ad rates because they cater to users with high incomes.
But Pinch Media's stats show that many apps have a big drop off rate after they're used once. "By a month out many users have moved on," Yardley told InternetNews.com.
For example, according to Pinch Media, only about 20 percent of users return to use a free app the day after they first download it and by 30 days out, less than five percent are using the app. And the drop-off rate is even a bit steeper for paid apps.
"Many of the 99 cent apps were written quickly for entertainment," said Yardley. "If you get something you can show to your friends and get a laugh out of it, that may well have been worth it. It's not a bad thing."
Apple did not respond to a request for comment by press time.
But iPhone developer Tony Bove said as the price goes up, publishers have to be careful they're providing value. "Once you get above $5, that's where people start saying 'Hey, I want my money back' if there's nothing useful there," he told InternetNews.com.
Bove notes that a lot of iPhone apps are being offered for 99 cents as a promotional rate to generate interest. Whether those publishers eventually do in fact raise the price, remains to be seen. Bove charges $2.99 for his Tony's Tips for iPhone Users program.
The AppStore is littered with free and low cost applications, but even the cheapest 99 cent ones can put a fair bit of money in a developer's pocket once it starts to sell in volume. Developers keep 70 cents on a 99 cent app, with Apple taking the rest.
A handful of applications Pinch Media has studied have generated more than three million downloads though Yardley didn't specify if those were free or paid. "There's always going to be a place for ad-supported applications, particularly for certain compelling entertainment titles people want to play every day," he said. "But if you're doing social networking and you charge, who is going to show up?"
Developers or publishers might also do well to experiment with pricing, according to Yardley. Almost all the paid iPhone apps are relatively low cost (with the rare exception over $9.99). But even within that price band Yardley said the analytics show a price cut can generate more sales.
This article was first published on InternetNews.com.