The mobile application (App) industry has grown tremendously over the past five years,
primarily fueled by small App development businesses. Lacking advertising budgets, these
relatively unknown, small businesses often offer free versions of their paid Apps to reduce
customer uncertainty about App quality and get noticed in the crowded App industry. In this
research we investigate the implications of offering free versions on the adoption speed of paid
Apps by building on the existing marketing and information systems literature on sampling and
versioning. We use a unique dataset of 9 million observations from 13,764 Apps for our analysis.
We find that while the strategy of offering free versions of paid Apps is popular, it impacts the
adoption speed of paid Apps negatively and this impact is stronger in the later life stages of paid
Apps. We also find that the negative impact of offering free versions on the adoption speed of
paid Apps is lower for utilitarian Apps. We expect that the results of our study will enable App
developers to make informed decisions about offering free versions of paid Apps and prompt
academicians to produce more work focusing on this industry.
Keywords: Mobile Apps, free versions, sampling, versioning, adoption speed, user rating,
developer reputation, product life stages.