Diversification and performance in the mobile app market: The role of the platform ecosystem

Abstract

We examine the effect of app developers' product line diversification decision on their performance and shed light on whether the type of platform ecosystem (open versus closed) where they commercialize apps influences this effect. We compare the revenue performance of diversified and specialized developers in Apple's App Store and Google Play. We show that in the Apple's App Store (closed platform) diversified developers always display lower performance than their specialized counterparts. In Google Play (open platform) diversification is beneficial in categories where diversified developers have predominant market share, whereas it is detrimental in categories dominated by specialists. Hence, platform supply side users, such as app developers, should factor in the platform ecosystem where they operate when making diversification decisions.