Sunday, October 17, 2004

Download-To-Buy Ratio: The Myth

There is one thing everyone starting in shareware business knows. In order to get a sale he should get a hundred downloads. In other words the typical download-to-buy ratio is 100 to 1.

I remember the time before starting with shareware. I was browsing and was looking at the download counts. If an app had 50 000 downloads I knew it had sold about 500 copies.

I couldn’t be more wrong. There was a simple fact that I haven’t realized yet.

Einstein knew it!

You know about relativity?

In reality this ratio varies. And it varies a lot. You can have a sale on every 30 downloads or you may have one on every 1000 downloads. There are a lot of factors which come into play.

Actually the ‘industry standard’ 100 to 1 is not a standard at all. No one can really measure the average download-to-buy ratio for the industry in a matter of fact. And the value is typically worse than the well known value. It is more likely somewhere between 150 and 200 to 1.

Why, oh why?

There are plenty of reasons why the ratio is different throughout different products.

One simple reason why people don’t buy is that they don’t need your application. They may have been initially interested in it. Then they have downloaded it. And then they found that it wasn’t what they expected. Or that they don’t need it. Or they didn’t like it. Or it was so similar to other apps that they forgot about yours. The list can go on forever.

And what do you think about the price? It is even possible that they liked the app; but was too expensive. But don’t count much on that. It’s more likely that your app hasn’t brought enough value for its price. So the answer may be improving the product rather than lowering the price.

Is it really that important?

You bet it is! Imagine you have a product with a download-to-buy ratio of 1000-to-1. Now that is a pretty bad ratio but it’s not that uncommon as we would like it to be. And now imagine you have found a way to increase it to 100-to-1. That will be a tenfold increase of your sales!

Even if we put aside that simple, obvious fact there are other things that are affected. If we decide to use Pay-Per-Click advertising this ratio will be extremely important.

If we pay the minimum of 5c to Google for a click but we have a download-to-buy ratio of 1000-to-1 we will have to earn at least $50 from every visitor. And keep in mind that not every visitor will download your application. Actually we have another ratio here :) Add some other costs like the payment processing company commission and the things are getting pretty nasty. You will be loosing money.

Let’s look at the other case. We have a download-to-buy ratio of 100-to-1. If we consider that only one in thee visitors actually downloads our app we are still standing pretty well. We paid only $15 (0.05 * 100 * 3) for a sale.

You know nothing yet!

If you think my calculations are correct then think again. You haven’t learned the most important lesson. A ratio is nothing taken out of context. Why do I say that?

If we have done the ads well we had a more targeted traffic than the average one you would get. So we can expect that we get a better download-to-buy ratio from these customers coming from our Google ads. But that’s only if we have targeted our ads correctly.

The Conclusion

There are no magic formulas that you can use. But you can use common sense and your brain. It helps.