Distimo, a Netherlands-based company that analyzes app store performance, set out to determine how effective discounts are and broke out its findings among the big two biggest players, the Apple App Store and Google’s Android Market in a blog post this week. 

The analysis shows that discounts can, but don’t always, have a significant effect on sales, particularly on the first day. For example, Distimo found that the average revenue rose by 52% in the Apple App Store for iPad when looking at those applications that were already among the 100 highest grossing applications in any category, on the first day of the sale. Overall, revenue increased 19 % over the entire length of the sale. (For Apple’s iPhone App Store the figures were +41% and +22% respectively). 

Android Market saw an increase of 7% for the first day of revenue, and +29% overall. 

But 30% to 50% of the applications on sale in these app stores experienced a decrease in revenue even though on average the revenue increased in all three stores (iPhone, iPad, Android Market) for the total group of applications on sale.  

“Our research found that it is important to offer a significant price reduction to actually earn more revenue when putting an application on sale,” said Distimo’s Gert Jan Spriensma, in the blog post. “In general, we noticed that the optimum sales occurred when the price was cut in half or the application was offered in tier 1 ($0.99) or tier 2 ($1.99).” 

Being a featured app helps too

Distimo also quantified the effect of being featured in one of the app stores. Here, Android Market apps gained the most. In its analysis of apps that were already ranked among the top 100 most popular applications, the average gain in the first three days after getting featured in Android Market was +42 ranks.  For Apple App Store for iPad (+27 ranks), and Apple App Store for iPhone (+15).

Earlier this month, ABI Research released an estimate that iPad users have made three billion app downloads in the year since the first iPad was released in 2010. It took two years for iPhone users to reach that same mark.