Rich Get Richer Phenomenon in the Mobile App Market

The market for mobile apps is relatively new, and it continues to grow at a rapid pace. By 2020, the mobile application market is expected to be a $77 billion industry (https://www.entrepreneur.com/article/236832).  A quintessential characteristic of these app marketplaces (iOS App Store & Google Play Store) are lists of top apps, which can be useful for consumers to find new applications for their smartphones and tablets.  However, these lists propagate the Rich-Get-Richer phenomenon that we have discussed in class.  In fact, in 2014, a pair of researchers at Stanford University, Bar Ifrach and Ramesh Johari, conducted a study to estimate the impact of the Rich-Get-Richer phenomenon (which they called an indirect effect or visibility effect) on app downloads in the Apple App Store and found some interesting results.

The most difficult part of the study was determining a way to measure this indirect effect, since an app’s rank is affected by demand while also determined by demand.  To accomplish this, they examined scenarios that “cause a group of contiguous apps to be shifted up or down in rank; we call these “no-swap” events.”  In these cases, it was safe to assume that this change in demand was exogenous, likely due to introduction of a new and popular app that shifted the rankings of other apps down.  The researchers analyzed “all ranking charts—free, paid, and grossing for the overall charts and all category charts—in the Apple App Store from June 2012 to March 2013.”

The researchers found that the indirect effect had a statistically significant impact on app downloads for the Top 20 apps in the app store, but not for apps in positions lower than 20.  Additionally, an app’s location in the Top 20 impacted the magnitude of the indirect effect.  Compared to the 20th ranked app, the highest ranked app received 90% more downloads due to this indirect effect.  Therefore, the App Store strongly exhibits the Rich-Get-Richer phenomenon, as the top-ranked apps receive more downloads both because they are good apps and because of their increased visibility due to being a highly-ranked app.

While these lists are easy for companies like Apple and Google to generate and help users find out about new applications, they severely skew the distribution of downloads to the higher-ranked apps, which can hurt smaller developers.  To combat this, some companies have created “What’s New” lists to highlight new apps, but the damage has already likely been done in the creation of top lists.  As this market continues to grow, these marketplaces must consider the benefits and consequences of ranking apps in this manner.

Link to study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2444542

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