The Mediating Role of Popularity Rank on the Relationship between Advertising and In-app Purchase Sales in Mobile Application Market

Abstract

In the booming industry of mobile application, a new business model has arisen as a lucrative way of monetization, which is characterized by scaling up user base via free distribution and following partial monetization. As a result, popularity rank and in-app purchase revenue are increasingly emphasized. In this context, understanding the relation among popularity rank, in-app purchase sales, and advertising is essential to optimal marketing decisions. For this purpose, this research investigates how advertising influences in-app purchase sales via popularity rank. Through our empirical analysis of a mobile game data collected on a daily basis, we show advertising expenditure not only improves popularity rank, but also increases in-app purchase sales. In addition, we demonstrate that mobile advertising effect on in-app purchase sales is fully mediated by popularity rank.