Does diversification pay in the app market? Evidence from Apple's App Store and Google Play

Abstract

In this paper we address the study of the effects of product line diversification on firm performance in the mobile application market. Specifically, we shed light on whether the distribution platform ecosystem where developers commercialize their apps influence the effect of product line diversification, i.e., diversification across different app categories, on developer sales performance. To these purposes, we compare the sales performance of diversified developers with that of category-specialized developers in the two major app stores (namely, Apple’s App Store and Google Play). Our results show that the diversification strategy has a positive impact on developer sales in Google Play, while no significant impact emerges in the Apple’s App Store. The cross-platform differences in consumer willingness to pay are the rationale behind the different effect of diversification on sales performance across platform ecosystems. Our results have an important implication for developers as they suggest that developers should factor in the app ecosystem where they operate when making the decision on whether to diversify or not.