尚孝純博士 an Understanding of First-Mover Advantages

國立政治大學資訊管理學系

碩士學位論文指導教授:尚孝純博士治政大立學

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An Understanding of First-mover‧

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a y t Advantagest of App Developmenti i s o r n e 行動應用之商業模式分析a i v l C n hengchi U

研究生:梁凱智

中華民國 103 年 6 月 Acknowledgements Firstly, I would like to express my sincerest gratitude to my supervisor, Professor Shari Shang, who guide me throughout my project, inspired me with valuable ideas and allowed me the room to explore my own interests. Secondly, I would like to thank my classmates, without whom I would not be able to finish and release my essay on the International Conference on Advances in Computing, Communication and Information Technology (CCIT). Thirdly, I would like to thank those who replied to the questionnaire, which greatly contributed to my research. Finally, I would also take the opportunity to thank my friends and family for their understanding and timely encouragement. I am lucky to have you all.

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摘要

近幾年來，智慧型手機靠著其方便多元的功能，已經成為大部份消費者生活中不可或缺的一部分。App Store 的出現使行動應用程式開發的市場較傳統應用程式開發市場容易進入。透過 App Store，開發者可以直接將軟體賣給位於世界各地的消費者。本研究想了解在一個發展如此迅速的市場中是否存在著先進者優勢，以及該如何維持其優勢。本研究屬於一探索式研究，本研究探討了過去的先進者優勢相關文獻，以了解傳統產業中的先進者優勢。先進者優勢的來源主要有：技術領導、資源佔有、轉換成本、網路外部性與定價優勢。為了瞭解在行動應用程式市場中是否存在先進者優勢以及如何維持優勢，本研究蒐集並分析了過去幾年來的行動應治用程式排行榜的相關資訊。發現政在行動應用程式開發市場中存在著上述之先進大者優勢，本研究也發現這些優勢可立以透過持續更新、與社群平台整合等策略來維持。學關鍵字: 先進者優勢、應用程式國

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Abstract The applications (apps) on Smartphones exhibit many kinds of innovation. With the powerful features of Smartphones, people can easily access the Internet, social networking, e-mail, and instant messaging. The emergence of app stores has removed the barriers of big investments in hardware and software for software development and has made software development simple and easy, with a few people or even a single person doing the work and quickly reaching users directly around the world. These unique features of app innovation create a need to explore whether first-mover advantages exist in app development and whether these first-mover advantages, if they exist, can be sustained. This exploratory study reviewed the literature about first-mover advantages in products, services, and e-commerce innovation.治 First-mover advantages often arise 政大 from sources such as technological立 leadership, resource pre-empting, switching costs, network externalities, and pricing advantages. With the objective of understanding 學 whether first-mover advantages exist in app innovation and how first movers can 國 sustain these advantages, this study have collected data about top-ranked apps of different kinds and analyzed their competitiveness, and this ‧ study presented our findings about the situation‧ of first movers in the app market. This study found that N apps enjoy advantagesa such as those mentioned above. This study alsoy discovered that t t i apps may sustain theirio competitive advantages through strategiess such as updating n r regularly to improve servicesa by integrating with social networkse and establishing l i v brand recognition through Facebook C fan pages, Twitter, andn blogs. h i U engch

Key Words: First-mover advantage, apps, app store.

TABLE OF CONTENTAbstract ...... 1

Chapter 1: Introduction ...... 5

1.1 Research Background ...... 5 1.1.1 Compendium of Smartphones ...... 5 1.2 Research Motivation and Research Objectives ...... 6 Chapter 2: Literature Review ...... 8

2.1 The App Development Market...... 8 2.1.1 The development of app stores ...... 8 2.1.2 App innovation and development ...... 9 2.2 First-Mover Advantages ...... 10 2.3 Sustaining the Competitive Advantages治 of Being a First Mover ...... 13 Chapter 3: Methodology ...... 政 ...... 大 ...... 15 3.1 The Research Process立 ...... 15 3.2 Data Collection...... 學 ...... 16

3.3 Data Analysis國 ...... 18 Chapter 4: Research Findings ...... 20

‧ 4.1 First-Mover Advantages in App Development ...... 21

‧ 4.2 Findings ofN Strategies to Sustain Advantages in App Development ...... 24 a y t Chapter 5: Conclusiont ...... i ...... 28 io s 5.1 Summary ...... n ...... r ...... 28 a e 5.2 Limitations and Future Research ...... i v...... 28 l C n Reference ...... hengchi...... U ...... 30 Appendix 1 - Lists of Apps for Case Analysis ...... 35

Appendix 2 - Questionnaires for Survey ...... 39

Appendix 3 - Questionnaires for Case Analysis ...... 40

Chapter 1: Introduction

1.1 Research Background

1.1.1 Compendium of Smartphones

The applications (apps) on Smartphones exhibit many kinds of innovations. With the powerful features of Smartphones, people can easily access the Internet, social networking sites, e-mail, and instant messaging. Gartner’s report on 2013 reveals that about 967 million Smartphones were sold in 2013 (Gartner, 2014). More than one million applications (Apple, 2013) have been released through the various app stores for the different mobile operating systems: e.g., Android, which is on most Smartphones; iOS on iPhones; and RIM on Blackberry. The market shares of Android and Apple are 66.4% and 19.1%, respectively (Gartner,政治 2014) shown in Table 1-1. The rapid development of applications for Smartphones is changing大 how people live. App stores have become a very appealing立 model for thousands of developers to develop innovative apps. 學 Table 1-1. Worldwide國 Smartphone Sales to End Users by Operating System in 2013

(Thousands of Units) ‧ Operating System 2013 Units 2013 Market 2012 Units 2012 Market

‧ N Share (%) Share (%)

Android a 758,719.9 78.4 451,621.0y 66.4 t iOS t 150,785.9 15.6 130,133.2i 19.1 i s Microsoft o 30,842.9 3.2 16,940.7r 2.5 n e BlackBerry 18,605.9a 1.9 v 34,210.3 5.0 Other OS 8,821.2l 0.9 i 47,203.0 6.9 C Un Total 967,775.8 hengc100.0hi 680,108.2 100.0 (Data sources: Gartner, 2014) App stores, like the Apple App Store (Apple) or Google Play (Google), have revolutionized the software industry over the last several years. Before Smartphones, only large companies had the ability to develop application software. But the emergence of app stores has overcome the barriers of big investments in hardware and software for software development and has made software development simple and easy, with groups of only a few people or even a single person doing the work and quickly reaching users directly around the world. App developers have the same exposure as large companies but without the huge logistics costs. Further, consumers can now buy apps easily and inexpensively. After an app is downloaded, it can contribute to the

5 revenue stream of the developer in many different ways. Any individual developer has the opportunity to create a world-famous app with innovative ideas.

1.2 Research Motivation and Research Objectives

In the booming market for mobile apps, users can find numerous powerful, innovative, and entertaining apps that cost only a few dollars—or are even free—on application platforms such as the numerous app stores and Google Play. As more and more developers wishing to make money through app development enter the market, they are finding a highly-competitive marketplace. For example, on Apple’s app store, more than 300,000 apps were launched in 2012, with more than 25,000 apps being added per month. With millions of apps available to users, gaining visibility in the sea of apps is becoming more difficult. In such a competi治 tive environment, some apps stand 政大 out for their innovative features立 , with a good example being Angry Bird (Rovio). Two years after its launch in December 2009, the Angry Birds series of apps were 學 downloaded more than 1 billion times (Rovio, 2012). However, even though many apps 國 have successfully achieved market acceptance, most have not been as well accepted by consumers. ‧

With the introduction‧ of the app store, the development of app innovations has N several differences froma innovation patterns in the manufacturing andy service industries. t t i Developers who engageio in app development now only need to pays the annual fee and n r learn a specific programminga language; then they can develop ethe innovative app in the l i v free integrated development environment C (IDE). Furthermore,n they can publish apps on h i U innovative distribution platforms suche asn ang capph store, where consumers can browse and buy apps easily. These unique features of app innovation raise the questions of whether first-mover advantages exist in app development and whether the first-mover advantages, if they exist, can be sustained. To seek answers to “What are the first-mover advantages?” and “How can these advantages be sustained?” this study reviewed past research and examined first-mover apps to test the existence of advantages and the strategies for sustaining them. Based on the past literature, it seems that first movers enjoy several advantages, including technological leadership, preemption of scarce resources, lower switching costs, lower pricing, and network externalities. They try to sustain these competitive advantages and their leading position by raising entry barriers, increasing user switching costs, and enhancing service diversity and quality. This study

6 collected data about top-ranked apps of different kinds and analyzed their competitiveness, and this study present our findings about the situation of first movers in the app market.

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Chapter 2: Literature Review 2.1 The App Development Market 2.1.1 The development of app stores According to research by Nielsen (2013), Smartphone owners in the U.S. now make up the majority (53%) of mobile consumers, with social networking (85%), maps/navigation/search (85%), productivity (74%), video/movies (65%), and games (61%) being the most-used types of apps among American Smartphone users. These apps are released mainly in the two major app stores—Apple and Google. App stores With 500 native applications for iPhone and iPod touch screens available at launch, the iOS App Store opened on July 10, 2008 (Apple, 2008), allowing users to browse and download useful apps. Within 72 hours after治 the launch, Apple announced that users 政大 had already downloaded more立 than 10 million apps from its new App Store. As of September 2009, there were more than 85,000 apps available on the App Store and 學 more than 2 billion apps had been downloaded (Apple, 2009). So far, there are more 國 than a million apps that have been seen on the App Store. The App Store now offers more than 800,000 apps for iPhone, iPad, and iPod touch users, with‧ consumers having downloaded over 40‧ billion apps. Applications on the App Store are divided into 23 N categories, with the amost-downloaded categories being Games (16.81%),y Education t t i (10.69%), Entertainmentio (9.09%), Lifestyle (8.11%), and Books (6.80%).s According to n r information released at Apple’sa Worldwide Developers Conferencee (WWDC), the App l i v Store has over 400 million active C accounts, operates in 155n countries around the world, h i U and developers have been paid over $5e billionngc byh Apple. Google Play The Android Market was announced by Google in August 2008 and was made available to users in October 2008. Along with the development of techniques, Google introduced Google Music and online movie rentals successively. To redirect its services, Google rebranded the Android market as Google Play in March 2012 and upgraded its services to offer music, movies, and books. Compared with the App Store, which was also launched in 2008, Google Play experienced a slower growth rate of applications, exceeding just 16,000 apps in December 2009 (TechCrunch, 2009). However, as Android’s Smartphone market share continued to grow rapidly, Google Play’s application number climbed even faster. In September 2012, Google announced that

Google Play had reached 25 billion app downloads and that it was offering more than 675,000 apps to Android users. 2.1.2 App innovation and development Innovation has long been the primary resource for competitive advantage in most industries (Schumpeter, 1934). There have been many reviews of the literature regarding the difference between product innovation and service innovation, with many of these reviews focusing on the degree of separability of production and consumption, or tangibility (Jackson et al., 1995). In general, there is no physical product associated with a service innovation to carry a brand name, and thus services must be produced and consumed simultaneously. Table 2-1. Comparison of Product, Service, and App Innovation Product 治 Service App Source of  Function 政  Interaction大  Self-motivation innovation  Service process  Self- 立 achievement 學  Share with others 國 Purpose  Market position  Improving loyalty  Sharing service of innovation  Attracting consumers  Attracting consumers‧ and  Enhancing entertainment

‧ N profitability

a y Investment in  Research and  Service process t 2. Skill in t i innovation programming iodevelopment  Consumer s r language n relationship e a  Staffs v 3. Annual fee l i Ch 1. MaterialsUn Focal point 4. Functionality engch6. Processi 9. User experience 5. Technology 7. Information 10. User 8. Interaction interface

Innovation delivery 11. Logistic  Delivery channel 12. App stores platform Innovation delivery 13. Product – people  People – people 14. Platform – channel people

However, with the rapid growth of app stores, several studies have considered apps as new integrative perspectives that combine the production and service elements (Daniels, 2000; Jacket et al., 2008). The development of app innovation has several unique features, differentiating it from innovations in the manufacturing and service industries (see the comparison in Table 1). First, developers engage in app innovation

9 not only for making a profit but also for self-achievement in the global network. Second, the development of the innovation is quite simple and easy in comparison with innovations for manufactured goods, which require huge investments in technology, and for services, which involve changes in the processes and human interactions. Developers who engage in app development only need to pay the annual fee and learn a specific programming language in the free integrated development environment (IDE), such as Xcode and Eclipse, and then they can publish apps through app stores, where consumers can buy apps directly.

2.2 First-Mover Advantages The first-mover advantages can政 be defined治 as the ability of early entries into markets to earn positive economic profits, and it is used大 here to discuss the benefits that an early entrant gains when立 releasing new products or services (Burnham et al. 2003). 學 Consolidating past studies (Lieberman at el. 1988; Varadarajan et al., 2007; Burnham 國 et al. 2003; Urban, 1986) about first-mover advantages in the product and service industries shows that early entrants enjoy advantages that includ‧ e technological

leadership, resource‧ preempting, lower switching costs, network externalities, and N pricing advantages. a y t t i Technological leadershipi s o r Lieberman and Montgomeryn (1988) noted that first moverse can gain advantages a i v from sustainable in innovativel technology. They consideredn two mechanisms: the Ch U “learning” or “experience” curve ande R&Dng patenting.chi First, in the standard learning- curve effect, the first movers can reduce unit production costs with cumulative experience, and thereby enjoy a long-term cost advantage in the physical market environment (Varadarajan et al., 2007). In addition, other studies have mentioned that the learning curve can create a substantial barrier to entry when learning can be kept proprietary (e.g., Spence, 1983). Second, first movers can enjoy advantages in the form of R&D or patent races through patenting or maintaining technology as trade secrets. Actually, patent protection appears to be important only in some industries, such as pharmaceuticals, where imitation can be costly and the imitator must go through the same regulatory approval procedures as the innovating firm. Varadarajan et al. (2007) also noted that with the dynamic nature of the Internet-enabled market environment, the patented innovation process is more significant than the learning-curve effect. In 10 addition to R&D and innovation in physical hardware, first movers also improve their managerial systems with innovative organizational forms. The first-mover advantages gained from organizational innovation are more durable than those from process or product innovation due to the slow diffusion of organizational innovation (Teece, 1980). Resource preempting First-mover advantages may stem from preemption of scarce assets that already exist (Lieberman et al., 1988). These assets could be physical resources or process inputs, or they could be related to positioning in space, such as geographic space, product space, etc. With superior information, first movers can achieve a competitive cost advantage by purchasing preemptive assets—e.g., natural resource deposits and prime retailing or manufacturing locations—below prices that would be faced by potential competitors. 政治 Some studies mentioned that first movers can also gain大 advantage from preempting spatial resources, including立 geographic space, product characteristic space, shelf space, 學 etc. In many markets, only a limited number of profitable firms can survive, so first 國 movers try to establish positions in geographic or product space to limit the amount of available space for later entrants (Varadarajan et al., 2007; Schmalensee,‧ 1978). For

instance, prescient banks‧ would have more opportunities to preempt the prime locations N for placing ATMs at pricesa below those that would prevail for later yentrants. However, t t i some research found thati it is difficult for first movers to gain advantages successfully o r through preemption of geographicn space in industries such as ecement and newspapers a i v (Johnson and Parkman, 1983;l Glazer, 1985), wheren competitors have similar Ch U technology and opportunities to enter.e ngchi Switching costs First movers can also gain advantages from buyers’ switching costs (Lieberman and Montgomery, 1988). Switching costs are defined as “One-time costs that consumers associate with the process of switching from one provider to another” (Burnham et al., 2003). Switching costs include uncertainty costs, evaluation costs, set- up costs, learning costs, etc. First, evaluation costs stem from buyers' initial transactions or investments in some ancillary products (Lieberman et al., 1988; Burnham, 2003). These ancillary products, such as software or after-sale service, will cost consumers extra time and other resources, so consumers seek new suppliers or products. Second, set-up costs stem from the process of getting acquainted with an alternative product or setting up a new product for initial use (Burnham et al, 2003).Third, learning costs are 11 the extra effort to learn about the new products. Consumers are reluctant to make an effort to switch from a current brand’s products to another brand’s product after they are accustomed to the products that they are currently using (Lieberman et al., 2007; Burnham, 2003). Fourth, uncertainty costs stem from the buyers’ insufficient information about product quality. Under conditions of information asymmetry, buyers also do not have enough knowledge about the performance of competitive products (Varadarajan et al., 2007). They are thus willing to choose products that have performed satisfactorily since they were first encountered. With switching-cost advantages, late entrants have to invest extra resources to attract consumers from the early entrants. Network externality First-mover advantages can stem from network externalities (Varadarajan et al., 2007), which occur when a product,政 industry治 standard, or service becomes more influential and valuable to its current and potential users大 as the size of the network increases (Katz et al., 1985).立 Network externalities are considered a better potential 學 source of first-mover advantages in Internet-enabled markets, and in technology or 國 communications-related industries, than in physical markets (Varadarajan et al., 2007).

Under the traditional constraint of a physical market, it is inconvenient‧ for buyers and

sellers to congregate‧ in a market exchange due to the factor of distance between sellers N and buyers. The effecta of network externalities may be affected by they distance between t t i buyers and sellers. However,i the constraints do not exist in electronics market exchanges. o r Instead, spatially separaten transactions are allowed in Internet-enablede markets. a i v Evidence has shown that sellersl and buyers are more likelyn to choose a market exchange Ch U that attracts most of counterparties.e n In g addition,chi competition between network externalities can be specific in different categories of products, technologies, or market exchanges (Varadarajan et al., 2007). By entering a market at an early stage, first movers acquire differentiation advantage by seizing opportunities to nurture a large user base before potential competitors’ entry. Pricing advantage Pricing strategies also play an important role in bringing advantages to first movers. Theoretical research suggests that consumers will be willing to purchase the products at higher price due to established brand loyalty or the uncertainty risk of purchasing alternative products (Urban, 1986). A strong brand loyalty will be established once consumers are accustomed to the first brand that performed satisfactorily. Furthermore, searching for information related to a superior brand requires considerable time and 12 effort on the part of consumers, and such efforts seldom create enough benefits. Because of the lack of information, consumers will not be willing to make a switching decision even if they have to pay more for the brands that they have been accustomed to using. In this case, later entrants must offer more price reductions to attract consumers to make a switching decision to try the alternative products. In addition, while first movers enjoy lower product costs, which are gained from the experience- curve effect or the preemption of resources, they can offer products with more competitive prices than those offered by later entrants. In this scenario, later entrants also need to concentrate on attracting consumers with more outstanding features. 2.3 Sustaining the Competitive Advantages of Being a First Mover Although first movers enjoy many advantages relative to later entrants, not every first mover can sustain its competitive政 advantages,治 especially in industries with low entry barriers, such as app development. So the challenge大 for first movers is to sustain their advantages. In order to立 further understand how first movers do this, we reviewed 學 the existing research and organized the strategies into three categories—raising entry 國 barriers, increasing user switching costs, and enhancing services—which are discussed below. ‧

 Raising barriers to‧ entry N

In order to deter apotential competitors from entering markets, they most frequently t t i adopted strategies are ireinvestment of innovative technology profitss in R&D, patent o r protection, and resourcen preempting (Varadarajan et al, 2003).e With leadership in a i v technology, first movers normallyl have performance thatn is superior to that of later Ch U entrants, which means that they havee slackng resourceschi that can be reinvested in R&D and innovation to sustain their elevated position in technological leadership. However, after the mid-1990s, the resources for reinvestment in R&D began to come from additional infusion of funds or “going public.” In the interest of retaining their technological advantages, patent protection can provide first movers with a legal framework and allow them to have a monopoly with regard to particular technologies (Atkins, 1988; Joseph et al., 2006). Another strategy that first movers can use to deter subsequent entrants from entering the market is to preempt desirable resources. By entering early in the market, first movers can gain superior information about the relevant resources. For example, they often have mover opportunities to select a more attractive niche to limit the available space for potential competitors (Bharadwaj et al., 1993; Varadarajan et al., 2007). 13

 Increasing user switching costs to “lock in” consumers First movers can also achieve competitive advantages and maintain market leadership by establishing switching costs to “lock in” clients, thus effectively preventing clients from switching to other suppliers. When a first mover manages to lock in its clients, analysis tools are implemented to collect data on the behavior and preferences of clients. It is especially easy for first movers to collect personal information and preference data in an Internet-enabled market environment because data collection happens automatically when consumers surf the Web (Varadarajan et al., 2007). By analyzing the collected information, a first mover can design “sticky” features such as personalization tools to raise switching costs and thus increase operational performance and profits (Johnson et al., 2003; Manchanda et al., 2006). Another approach that first movers政 may 治use to enlarge switching cost is investing in shaping information to create asymmetry. Under大 conditions of information asymmetry, consumers tend立 to stay loyal to products that they have understood 學 sufficiently well. Even consumers purchasing for first time tend to favor products 國 manufactured by leading brands. Thus, first movers can invest in brand building and brand equity to create information asymmetry, making their‧ products more

understandable compared‧ with those of later entrants. In this way, brand equity will N become a source of competitivea advantage when products are basicallyy undifferentiated t t i in markets (Varadarajani et al., 2007). s o r  Enhancing services to nconsumers e a i v Information that has beenl shared openly and in a n timely and detailed manner Ch U enables companies to analyze the linkse betweenngc halli of the businesses and industries in which they operate and to provide customized services to the final consumers. First movers can offer innovative services that strongly integrate with service providers and external consumers based on ICT service innovation (Bygstad et al., 2009). For example, McKesson, a large medical and pharmaceutical technology company, improved its consumer service and increased switching cost by providing pharmacists with computer terminals that allow them to enter orders directly (Powell et al., 1997). Another example is frequent-flyer programs, which are loyalty-seeking programs offered by many airlines by allowing consumers to accumulate frequent-flyer miles, which can then be redeemed for extra benefits such as travel class upgrades (Klemperer et al., 1986).

Chapter 3: Methodology 3.1 The Research Process This research is exploratory, with the objective of arriving at an understanding of whether first-mover advantages exist in app innovation and how first movers can sustain such advantages. To answer these questions, this study is conducted in six stages, as summarized in Figure 3-1 and Table 3-1, which shows the purpose, process, and deliverables of each stage. The first stage consists of reviewing past research to identify the advantages that first mover enjoy and how they can sustain these advantage. Based on the results of the first stage, the second stage is designed to further collect research data, a collection of information that comes from case analysis, expert opinions and questionnaire. The third stage involves analyzing research data in more depth. By wrapping up the findings from previous stages,治 the fourth stage is aimed at concluding 政大 the research and targeting to立 organize research findings in a comprehensive manner that can further benefit app developers or coworkers in the app market. 學 Table 3-1. Descriptions of the Research Process 國 Activities Why How Result

Literature To understand existing Review literature about ‧ A preliminary review knowledge about first- first-mover advantages in understanding of first-

‧ moverN advantages products, services, and e- mover advantages and commerce innovation strategies for a y sustainingt advantages t i Study of app To build iinsights about Assess reports, market sUnderstanding app o r market app developmentn and analysis, and official e development and the competition ina the app releases about the app v competitive positions l i market Ch market Un of app developers engchi Data To track the market Collect daily top-300 lists Period distribution of collection positions of different kinds from Feb 8, 2008 to Sept apps in the top lists of apps 30, 2013 Data analysis To find out what first- Analysis of app market Preliminary findings mover advantages app position on App Annie for on each first-mover developers enjoy, and how each category from the app the advantages can be literature review sustained.  Examine the effect of price or version changes  Verify first-mover advantages and initiatives for sustaining the advantages Conclusion To organize findings and Consolidate preliminary Findings and draw a conclusion findings with previous implications theories of first-mover advantages

Case Analysis

Literature Expert Data Findings Review Opinion Analysis

Questionn aire 治政大立Data Collection Figure 3-1, Research Process 學

國 3.2 Data Collection

‧ To verify advantages and strategies, we organized in the literature review a case

‧ analysis, a questionnaire,N and expert interviews. The method for verifying every

a y advantage and strategy depended on their characteristics (See Tablet 3-2). t i Table 3-2. Descriptionsi of the Research Process s o r n e Advantages anda Strategies Methodi v l C n Technology leadershiphe ngchiExpert U Opinion Resource preemption Case analysis Advantages Switching costs Questionnaire Pricing advantages Case analysis Network externalities Case analysis Raising the barrier to entry Case analysis Strategies Increasing switching costs Case analysis Enhancing services Case analysis

Case analysis The data for case analysis were collected from organizations and Websites that provide reports or statistics about app stores. There are several organizations and

Websites that provide such data. However, we chose App Annie (App Annie, 2013), a Website that provides daily and hourly ranking data for apps collected from The App Store and Google Play, to obtain the data we needed. App Annie also helps enrolled developers to track their apps’ downloads and revenues, and it provides mobile analytics for iOS and Android. Furthermore, App Annie revealed that more than 200,000 apps, and 80% of the top app publishers, use App Annie data. Because Apple’s App Store has the most downloads among app stores, we chose it as our data source. First, every 24 hours we collected the top 300 free and paid app lists for all categories. However, the earliest that top-ranking lists could be obtained from App Annie started on February 8, 2008. We collected the daily ranking data from February 8, 2010 to September 30, 2013. Second, we calculated how many days every app had been listed in the top-300 list. By doing this, we政 could 治determine how long every app had been listed on the top-300 list, and we made a table that presents大 the period distribution of apps that have been listed 立on the top lists. We found that there were 18,041 apps that 學 had never been listed in the top list, including 7,232 paid apps, 6,725 free apps, and 國 4,084 apps that had been removed from the App Store. Third, for our research subjects we picked out apps (Appendix 1) that had been listed on the top ‧ charts for more than

two years. ‧ N

Expert opinions a y t t i A group of app developersi were selected for this study becauses of their experience o r and expertise in the developmentn and management of app softwaree on Smartphones a i v (See Table 3-3). In order to getl the experts’ opinions, wen designed several questions Ch U (Appendix 2) for the respondents to answer.eng Thech purposei of this stage was to provide understanding of how apps gained advantages through technological leadership. Table 3-3. Lists of Selected Experts Years of Category of Experts Description Downloads Experience Apps James Eight Productivity Product Manager 1,500 months Daniel Two years Social Developer Not Networking published Wei Four years Utilities Developer Not available Pei-Kang Two years Productivity Developer, Product 900,000 Manager

Questionnaire The questionnaire was used to verify the strategies and advantages that we listed above, and it helped us to understand consumers’ switching behavior with regard to apps and to identify the factors that affect consumers’ switching behavior. In order to collect consumers’ switching behavior on apps, the questionnaire was divided in to three sections, with each section focusing on one type of switching cost based on the characteristics of the app’s development and on the literature review. To do this, a survey was conducted, and the questionnaire was distributed to 222 participants from whom we collected data. Of the respondents, 53% were male and 47% were female, and 56% were using Android devices, while 44% were using iOS devices. 3.3 Data Analysis After collecting the necessary data,政 we organized治 the criteria listed in Table 3-4 to come to an understanding of the first-mover advantages大 of app developers and their strategies for sustaining the立se advantages. In order to gain expert insights, we conducted 學 several interviews with different experts in the field to obtain their thoughts on the 國 advantages stemming from technology leadership. The questionnaire was sent to a selected sample of recipients to ascertain whether apps with advantages‧ under certain

circumstances were‧ in accordance with recipients' replies. When it came to case N analysis, we first categorizeda the apps into four groups based on they amount of time t t i they had been listed on ithe top charts. The categories were: (1) appss that had been listed o r on the top charts less thann a month, which we defined as appse without advantages; (2) a i v apps that had been listed on lthe top chart for more than na month but less than a year, Ch U which we defined as apps with short-termen advantagesgchi ; (3) apps that had been listed on the top charts for more than a year but less than 2 years, which we defined as apps with medium-term advantages; and (4) apps that had been listed on the top charts for more than 2 years, which we defined as apps with long-term advantages. Second, we selected categories in which there were more than 10 apps with long-term advantages, and these included entertainment, games, music, photo and video, social networks, and utilities. Finally, based on the literature review, we prepared a series of questions (see Appendix 3) to examine each app that was picked up in the previous step.

Table 3-4. Criteria for Data Analysis Advantages and Strategies Factors Criteria Technology leadership Patent protection Expert opinions How long had apps been listed Resource preemption Space in top charts in the top charts Data The proportion of participants Learning cost who agreed that they would Switching costs Advantages not switch to another app Uncertainty because of the factors The proportion of apps still Pricing advantages Loyalty listed on the top charts after raising their price. Network externality Externalities The scale of app stores Raising the barrier to The proportion of apps that Continuous updates entry continuously update The proportion of apps that Facebook治 fan page 政大 have a Facebook fan page The proportion of apps that are 立 Twitter accessible on Twitter Increasing switching 學The proportion of apps that Official Web site costs 國 have an official Web site Strategies The proportion of apps that Blog have‧ blogs The proportion of apps that ‧ Peripheral N have peripheral products a The yproportion of apps that Social Login t t allowi social login i s Enhancingo services Ther proportion of apps that n Sharing through a social eallow users to share content a network v l i through a social network C Un hengchi

Chapter 4: Research Findings

This chapter presents the examination of first-mover advantages and strategies to sustain the advantages. Of the participants, 54% were using Android devices, 42% were using iOS devices, and 4% were using devices with other systems. Of the apps we identified as having long-term advantages, we selected 120 apps from the categories in which there are more than 10 apps with long-term advantages, including entertainment, games, music, photo and video, social networks, and utilities. Table 4-1 summarizes our findings on first-mover advantages, which are explained in the following section.

Table 4-1. Research Results Advantages and Strategies Factors Findings Unlikely to bring apps Technology leadership Patent治 Protection 政大 advantages Unlikely to bring apps Resources preemption立 Space in top charts advantages 學 Data Likely to bring apps advantages 國 Unlikely to bring apps Advantages Learning Cost advantages

Switching costs ‧ Likely to bring apps Uncertainty advantages, but only for paid

‧ N apps Pricinga advantages Loyalty Likelyy to bring apps advantages t Networkt externality Externalities Likelyi to bring apps advantages i s o Likelyr to be an effective Raising the nbarrier to entry Continuous updates e a i v strategy l n Likely to be an effective C Facebook fanU page hengchi strategy. Likely to be an effective Twitter strategy Likely to be an effective Increasing switching costs Official Web site strategy. Unlikely to be an effective Strategies Blog strategy. Unlikely to be an effective Peripheral strategy Unlikely to be an effective Social login strategy. Unlikely to be an effective Enhancing services Sharing to a social strategy except for certain network genres such as music and photo- and-video apps

4.1 First-Mover Advantages in App Development Technological leadership According to the content of the interviews, we made the following observations. First, only one of the interviewees’ development process was hindered by other competitors’ patents. If the patent owner had any intention of suing companies that infringed their patents for apps, then patents would be a great barrier to app development. “Due to competitors’ patents, we spent extra time to figure out alternative ways to achieve our functionality,” the interviewee said. Second, two respondents had their own patents, but they only use them defensively. One interviewee said “We will not sue other companies actively unless those companies sue first because the cost of litigation is not going to be cheap and we would rather concentrate on optimizing our apps’ features.” Another interviewee政 also said治 “I thought patents [would be] like an insurance policy. Our company is too small to stop competitors大 by suing them because of the cost.” Third, all interviewee立 s thought that patents can only bring them advantages 學 by increasing potential competitors’ barriers to entering the market temporarily. 國 According to these opinions, we concluded that developers thought competitors’ patents could not be potential obstacles to app development. Therefore‧ we formed the

following hypothesis:‧ N

It is unlikely fora apps to gain advantages through patent protection.y t t i Resources preempting i s o r This study reviewedn the past literature and found that ine the standard business a i v environment almost all of thel desirable resources are n tangible or limited, such as Ch U manufacturing locations and spatial resources.engc However,hi apps are digitalized products, so app development is not restricted by location or other physical resources. Further, the shelf space in app stores, such as Apple’s App Store and Google’s Google Play, is unlimited. Take Apple’s App Store as an example. It has over 500,000 apps for consumers to buy. It is hard for consumers to browse every app, so instead they browse apps through top charts, featured, searches, etc. Because the number of apps on top charts and featured is limited, this study identified the space in top charts and featured apps as preemptible resources in the app market. Table 4-2 shows the distribution of the top charts of Apple’s App Store from February 8, 2008 to September 30, 2013. We found that 79.8% of apps did not have any advantages, meaning that those apps had been listed on the top charts less than a month. Only 1.5% off apps had long-term advantages, meaning that those apps had 21

been listed on the top charts for more than 2 years. Therefore we formed the following hypothesis: It is unlikely for apps to gain advantages through preempting space in the top charts. Table 4-2. The Distribution of Apps That Had Been Listed on the iPhone Top Charts From February 8, 2008 to September 30, 2013 Apps Without Apps With Short- Apps With Medium- Apps With Long- Genres Advantages Term Advantages Term Advantages Term Advantages Book 133 20 2 3 Business 151 19 7 0 Catalogs 25 7 0 0 Education 381 52 4 3 Entertainment 873 261 31 19 Finance 107 政12 治 2 6 Food & Drink 128 18 大 2 3 Games 5,243 立 1,206 135 67 Health & Fitness 353 53 9 9 學 Lifestyle 454 92 4 12 Medical 國61 5 0 0 Music 357 57 15 13

‧ Navigation 107 13 3 5

News ‧ 175 20 3 3 N Photo & Video 725 154 21 12 a y Productivity t 422t 53 13 i 5 Reference 174io 23 8 s 5 n r Social Networking 232 a 66 14e 17 Sports 197 43 i v0 3 l C n Travel 208 he 20 hi U 6 5 Utilities 539 n89 gc 22 15 Weather 92 25 3 3 Grand Total 11,137 2,308 304 208

Switching costs From the results of the questionnaire, we tried to determine consumers’ switching behavior with regard to apps. First, we found that 91.4% of the participants would not switch to a new app because of the necessary data stored in apps that they were already using and the difficulty of transferring the data to another app. Therefore, we considered that apps could gain competitive advantages from the necessary data stored in them. Second, 98.6% of the participants thought that it was easy to learn how to use a new app. Therefore, this study considered that the potential advantages stemming from

22 learning costs did not exist in the app market. Third, when it came to the uncertainty costs, 94.1% of the participants thought that they would not purchase a new app because they were unfamiliar with the new app. In addition, 63.5% of participants thought that they would not download a new app, even if it was free, because they were unfamiliar with the new app. Therefore we formed the following hypothesis: It is likely for apps to gain competitive advantages from uncertainty costs when apps were not free. Network externality According to the literature review, sellers and buyers were more likely to choose a market exchange that had attracted the most counterparties. By entering a market at an early stage, first movers acquire a differentiation advantage by seizing opportunities to nurture a large user base before potential政 competitors治 enter the market. According to the literature review, when consumers want to buy a大 new product but do not have enough knowledge about it,立 they are more likely to choose a product that the most 學 people are using. In the app market, there is only one app store for each mobile 國 operation system (i.e., the App Store for iOS, Google Play for Android), and every app store has top charts where users can buy or download the top apps. ‧ Therefore we formed

the following hypothesis:‧ N

It is likely for aapps to gain advantages through network externalitiesy in the app t t i market. i s o r Pricing advantages n e a i v This study reviewed thel past literature and foundn that first movers can gain Ch U advantages through higher prices ore lowerng c priceshi than competitors under specific conditions. First, with the experience and learning curve effect or preemption of resources, first movers can offer products with more competitive prices than later entrants due to lower product costs. However, in the app market, developers release an app to an app store, and all users can download or buy it directly. Also, the quantity supplied is limitless unless the developer removes it from the app store. Because there was no experience and learning curve effect in app development, this study found that apps could not gain advantages through charging lower prices than competitors. Second, evidence showed that customers would be willing to purchase the products at higher prices due to established brand loyalty or the uncertainty risk of buying alternative products. This study examined the 79 paid apps with long-term advantages that we identified as subjects. We found that among the 79 paid apps, 31 apps had never raised 23 their prices, including 28 game apps, two music apps, and a utilities app. The two music apps were Ringtone Designer Pro (Blackoutlabs, 2014) and TuneIn Radio Pro (TuneIn, 2014), and the utilities app was Flashlight®. Furthermore, 23 apps, including 22 game apps and a music app, could keep their advantages and still be listed on the top charts after their prices were raised. The only music app, Ringtone Designer Pro (App Annie, 2014), for instance, had raised its price from $0.99 to $1.99 between Aug 25 and Sep 18, 2010, but its ranking never dropped out of the top 20 in the period. Another example is Doodle God™ (App Annie, 2014), a game app, which had raised its price to $1.99 off and on, but it remained on the top charts. Therefore we formed the following hypothesis: Apps could enjoy pricing advantages through established brand loyalty or the uncertainty risk of purchasing alternative政 products.治大 4.2 Findings of Strategies立 to Sustain Advantages in App Development 學

Strategies to raise barriers國 to entering the market

Traditionally, first movers have performance that is superior‧ to later entrants because they have slack‧ resources to reinvest in R&D and innovation to sustain their N elevated position in a technological leadership. In the app market, y the most common t t i strategies of reinvestmentsio in technology are publishing sequel versionss and providing n r updates with feature improvements.a Based on an examination ofe 120 apps, we identified l i v 89 apps that updated continuously C with new features, whichn did not include updates h i U with support of new mobile operatinge systemsngc andh bug fixes (see Table 4-3). We found that among 64 game apps, 70% of them updated continuously, but among another 56 apps, more than 90% of them updated continuously. For example, Pocket God (Bolt Creative, 2014) has updated its product more than 30 times since it was first published in 2009. It regularly updates and adds new episodes that contain puzzles and exciting features. Shazam (Shazam, 2014) continuously updates on a monthly basis and releases new features and improvements for user experience. Shazam was just a music- recognizing app in its early stage, but it kept improving its functionality with later updates such as a new interface design, faster tagging and recognition, and the convenience of purchasing music releases. The continual updating of the app Camera+ (Tap Tap Tap, 2014) is another case in point—it has been downloaded more than 10

24 million times. In addition, Camera+ has released more than 40 updates since the day it was published, and 12 of the updates were released in 2013, including new effects, borders, filters, and a more convenient interface design to improve users’ experiences. Therefore, this study concluded that apps had the capability to sustain their advantages through updates, except for game apps, which had fewer updates than other apps. For example, Sims 3, which is published by Electronic Arts (Electronic Arts, 2014), has only been updated twice since it was published. Therefore we formed the following hypothesis: Apps likely could sustain their advantages through raising the barrier to entry, except for game apps. Table 4-3. Numbers of Apps That Continuously Update With New Features Photo & Entertainment 治Games Music Utilities 政 Video Number of apps that 大 continuously update with 立 18 45 11 12 10 new features 學 Total number of apps in 19 64 13 12 12 each category 國

Strategies to increase switching costs ‧

‧ This study reviewedN the past literature and found that first movers could sustain

a y their advantages through increasing switching costs. In the appt market, the most t i common way to increaseio switching costs was to build brands loyalty. This study n r analyzed methods used by thea 120 apps we identified as subjectse to build brand loyalty. l i v From the analysis (see Table 4 -4C), we made the followingn observations. First, Twitter, he i U Facebook, fan pages, and official Websitesng werech the most-used ways to build brand loyalty. Facebook and Twitter were the most popular ways for game apps, but having an official Website was the most popular way for utilities and photo-and-video apps to build brand loyalty. For example, Halfbrick (Halfbrick, 2014) had 6.4 million likes on its Facebook fan page. It regularly shared news and interesting content such as photos of amazing fruit carving on its fan page. In addition, Halfbrick also had 188,000 followers on its Twitter page. Halfbrick shared its news and responded to people’s tweets on its Twitter account. People can follow the latest news about Halfbrick and its apps through the fan page and Twitter. Second, only about 15% of game and entertainment apps had peripheral products. Examples of app developers who did are Pocket God (Bolt Creative, 2014), which sold vinyl figures and t-shirts, iGun Pro

(CafePress, 2014), which sold t-shirts and iPhone cases, and Angry Birds (Rovio, 2014), which sold toys, t-shirts, a theme CD, and a promotional DVD in its online store. Third, ~16–17% of entertainment, photo and video, and utilities apps had their own blogs, and about 30% of game apps had blogs. However, none of the music apps used blogs to build customer brand loyalty. Therefore we formed the following hypothesis: It is likely for apps to sustain their advantages through maintaining Facebook fan page, Twitter, and official Websites. On the other hand, it is unlikely for apps to sustain their advantages through blogs and peripherals. Table 4-4. Results of Examination of Brand Building Entertainment Games Music Photo & Video Utilities Twitter 9 58 11 7 9 Facebook fan page 12政治61 11 8 5 Peripheral 3 10 大0 0 0 Official Website 立 11 55 12 12 12 Blog 3 21 0 學 2 2 Total numbers of apps 國 19 64 13 12 12 in category

‧ Strategies to enhance services

‧ N This study reviewed the past literature and found that first movers could sustain a y t their advantages throught enhancing services. In the app market, thei most common way io s to enhance services was integration with social networks, includingr Twitter, Facebook, n e a v and Google Plus, among others.l Social login and sharingi to social networks were C Un methods widely used in apps. Socialhe loginng isc a hformi of single sign-on using existing login information from a social networking service to sign into a third party Website. However, from the results of our analysis (see Table 4-5), only about 12% of apps supported social login, and therefore we concluded that this was not an effective strategy to sustain competitive advantages. When it came to sharing contents on social networks, most photo-and-video and music apps supported the feature. For example, 360 Panorama (Occipital, 2014) allows users to share 360 view photos to the world or on users’ Facebook and Twitter pages. Another example is SoundHound (SoundHound, 2014), which is a music-recognition app that allowed users to share identified songs on Facebook and Twitter. However, there were two music apps that did not support sharing on social networks—Ringtone Designer Pro (Blackoutlabs, 2014) and Ringtone Maker

(Zentertain, 2014)—and both of them were apps that allowed consumers to create custom ringtones and text tones. Therefore we formed the following hypothesis: It is unlikely for apps to sustain the advantages through social login. It is likely for apps to sustain the advantages through sharing on social networks only for music and photo-and-video apps. Table 4-5. Results of Examination of Enhancing Services Photo & Entertainment Games Music Utilities Video Social login 2 5 4 2 1 Sharing on social 9 24 10 12 5 network Total number of apps in 19 64 13 12 12 category 治政大立學

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Chapter 5: Conclusion 5.1 Summary In order to make apps more competitive, it is important for app developers to have a wide understanding of what factors can bring apps advantages and what strategies can sustain apps’ competitive advantages. Therefore, we proposed two research questions: (1) Do first-mover advantages exist in app development? and (2) If so, how can these advantages be sustained? For these questions, we intended to archive advantages and strategies that top apps may have through the literature review. Then we verified the advantages and strategies individually through expert opinions, case analysis, and a questionnaire. As a result, we found that apps enjoy advantages such as technological leadership, resource preemption, network externalities, pricing advantages, and switching costs of transporting data stored in治 apps. We also discovered that apps may 政大 sustain their competitive advantages立 through strategies such as updating regularly, improving their services by integrating with social networks, and establishing brand 學 recognition through Facebook fan pages, Twitter, and blogs. 國 The practical implication of this study is to provide app developers with guidelines on the factors that give apps advantages and the strategies developers‧ need to devise to keep their apps’ advantages.‧ To increase apps' competitiveness and maintain their N sustainability, it is necessarya for app developers to recognize these yfactors. We looked t t i at previous research devotedio to factors that affect first movers's advantages, and we n r ascertained that the researcha only cast light on the use of physicale resources. Therefore, l i v the theoretical contributions of Cthis study help explain hown first movers' advantages h i U work for app development and industriesen ing whichch digitalized products are provided.

5.2 Limitations and Future Research Although this study provides insight into how first-movers advantages work for app development and the factors that have the most influence on the advantages, there are still some limitations. First, because the number of apps with long-term advantages was not large, this study only analyzed apps in five categories that contained more than 10 apps with long-term advantages. Therefore, we recommend that future research should analyze apps in all categories. Second, this study only analyzed apps with long- term advantages, so we recommend that future research should analyze apps with medium-term and short-term advantages in order to compare and contrast apps

28 enjoying different types of advantages. We hope that the findings of this study will provide a base for future study of first-mover advantages in app development.

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Appendix 1 - Lists of Apps for Case Analysis

AppName Released Artist Name Price Genre AgingBooth 2010-02-23 PiVi & Co 0.99 Entertainment Big Button Box Pro 2009-12-18 Shaved Labs Ltd 0.99 Entertainment Gun Builder 2010-04-19 Win Sheng Loh 0.99 Entertainment Pocket God 2009-01-09 Bolt Creative 0.99 Entertainment Talking Larry the Bird 2010-07-30 Out Fit 7 Ltd. 0.99 Entertainment Texts From Last Night 2009-08-08 Texts From Last Night 0.99 Entertainment The Moron Test 2009-04-21 DistinctDev, Inc. 0.99 Entertainment Justin.tv 2010-03-23 Justin.tv 4.99 Entertainment CamWow: Free photo booth effects live on 2011-02-18 Jing Chan Free Entertainment camera! Cool Wallpapers HD & Retina Free with Facebook 2009-12-17 Kappboom Inc. Free Entertainment & Twitter for iPhone iPod iPad 政治 Fandango Movies – Times 大 2009-03-27 Fandango Free Entertainment & Tickets 立 FatBooth 2010-05-19 PiVi & Co 學Free Entertainment Hulu Plus 2010-06-29 Hulu, LLC Free Entertainment iGun Pro™ - The Original國 Crimson Moon 2009-03-09 Free Entertainment Gun Application Entertainment LLC IMDb Movies & TV 2009-12-08 IMDb Free‧ Entertainment Movies by Flixster, with ‧ 2008-07-11 Flixster, Inc. Free Entertainment Rotten Tomatoes N

Netflix a 2010-04-01 Netflix, Inc. Free y Entertainment t Redbox t 2009-11-18 redbox Freei Entertainment io s Talking Tom Cat n2010-06-26 Out Fit 7 Ltd. Freer Entertainment Angry Birds 2009a -12-11 Rovio Entertainment Ltd e0.99 Games l i v Angry Birds Seasons 2010 -10-21 Rovio Entertainment Ltdn 0.99 Games Ch U BATTLESHIP 2009-12-14 eElectronicngc Artshi 0.99 Games Cartoon Wars 2009-07-25 BLUE 0.99 Games Cartoon Wars 2: Heroes 2010-10-16 BLUE GNC 0.99 Games CLUE 2009-05-15 Electronic Arts 0.99 Games Cut the Rope 2010-10-05 Chillingo Ltd 0.99 Games Cut the Rope: Experiments 2011-08-04 ZeptoLab UK Limited 0.99 Games Doodle Army 2010-01-14 Chad Towns 0.99 Games Doodle Jump 2009-03-27 Lima Sky 0.99 Games Eden - World Builder 2010-12-02 Kingly Software Inc 0.99 Games Flick Fishing 2008-11-06 Freeverse, Inc. 0.99 Games Flight Control 2009-03-06 Firemint Pty Ltd 0.99 Games Fruit Ninja 2010-04-20 Halfbrick Studios 0.99 Games MONOPOLY 2009-11-20 Electronic Arts 0.99 Games MONOPOLY Here & 2008-12-09 Electronic Arts 0.99 Games Now: The World Edition

Moto X Mayhem 2009-07-26 Occamy Games 0.99 Games NBA JAM by EA 2011-02-10 Electronic Arts 0.99 Games SPORTS™ Peggle 2009-05-11 PopCap 0.99 Games Plants vs. Zombies 2010-02-15 PopCap 0.99 Games Robot Unicorn Attack 2010-06-02 [adult swim] 0.99 Games Solitaire by MobilityWare 2008-07-11 MobilityWare 0.99 Games Sunday Lawn 2009-04-27 Donut Games 0.99 Games TETRIS® 2011-12-01 Electronic Arts 0.99 Games THE GAME OF LIFE 2009-08-13 Electronic Arts 0.99 Games Classic Edition The Impossible Game 2010-04-20 FlukeDude Ltd 0.99 Games Tiger Woods PGA 2011-03-29 Electronic Arts 0.99 Games TOUR® 12 Tiny Wings 2011-02-18 Andreas Illiger 0.99 Games Traffic Rush 2009-07-12 Donut Games 0.99 Games Ultimate Mortal Kombat™ 2010-12-16政 Electronic治 Arts 0.99 Games 3 大 Unblock Me 2009立-05-16 Kiragames Co., Ltd. 0.99 Games Where's My Water? 2011-09-22 Disney 0.99 Games 學 YAHTZEE™ Adventures 2008-11-14 Electronic Arts 0.99 Games Zombie Gunship 國 2011-07-21 Limbic Software 0.99 Games Zombieville USA 2009-02-15 Mika Mobile, Inc. 0.99 Games

‧ Bookworm 2009-03-22 PopCap 1.99 Games

Doodle God™ ‧ 2010-06-11 JoyBits Ltd. 1.99 Games N Monkey Preschool a 2009-08-31 THUP Games 1.99 y Games Lunchbox t t i OvenBreak i 2009-06-15 Devsisters 1.99s Games o r Phase 10 n2009-01-14 Magmic Inc. 1.99 Games a e Stick Stunt Biker 2010-08-23 Robert Szeleney i v 1.99 Games l C n Virtual Families 2009-06-25h eLast Day of Worki U 1.99 Games Bloons TD 4 2010-12-07 Ninjang Kiwic h 2.99 Games RISK 2010-07-22 Electronic Arts 2.99 Games Call of Duty: Zombies 2009-11-16 Activision Publishing, Inc. 4.99 Games Family Feud™ 2009-12-16 Ludia 4.99 Games The Oregon Trail 2009-03-27 Gameloft 4.99 Games The Sims 3 Ambitions 2010-09-16 Electronic Arts 4.99 Games UNO™ 2008-11-16 Gameloft 4.99 Games Words With Friends 2009-07-19 Zynga Inc. 4.99 Games Chair Entertainment Infinity Blade 2010-12-09 5.99 Games Group, LLC SCRABBLE 2008-07-11 Electronic Arts 5.99 Games The Sims 3 2009-06-02 Electronic Arts 6.99 Games Angry Birds Free 2011-01-05 Rovio Entertainment Ltd Free Games Angry Birds Rio 2011-03-22 Rovio Entertainment Ltd Free Games Cut the Rope Free 2010-10-07 Chillingo Ltd Free Games

Fruit Ninja Free 2010-12-20 Halfbrick Studios Free Games Jetpack Joyride 2011-09-01 Halfbrick Studios Free Games NAMCO BANDAI PAC-MAN Lite 2008-10-18 Free Games Games Solitaire 2010-03-18 MobilityWare Free Games Temple Run 2011-08-04 Imangi Studios, LLC Free Games Unblock Me FREE 2009-05-16 Kiragames Co., Ltd. Free Games Words With Friends Free 2009-07-19 Zynga Inc. Free Games Zombie Highway 2010-08-27 Auxbrain, Inc. Free Games MusicID with Lyrics 2009-06-25 Gravity Mobile 0.99 Music Ringtone Designer Pro - Create Unlimited 2010-07-31 BLACKOUT LABS 0.99 Music Ringtones, Text Tones, Email Alerts, and More! I Am T-Pain 2.0 2009-09-04 Smule 2.99 Music Ultimate Guitar Tabs - largest catalog of songs 2010-03-16 Ultimate Guitar 2.99 Music with guitar chords, tabs 政治 and lyrics 大 TuneIn Radio Pro 2009立-09-03 TuneIn 3.99 Music iHeartRadio - Free Music Clear Channel 2008-10-07 學Free Music & Internet Radio Management Services, LP Pandora Radio 國 2008-07-11 Pandora Media, Inc. Free Music Ringtone Maker - Make free ringtones from your 2010-09-15 Zentertain Ltd. Free‧ Music music!

‧ Shazam Entertainment Shazam 2008-07-11 Free Music N Ltd. a y SoundHound 2010-04-27 SoundHound, Inc. Free t Music t i Spotify i 2011-07-14 Spotify Ltd. Frees Music o r TuneIn Radio n2011-04-19 TuneIn eFree Music VEVO - Watch Free HD a i v Music Videos, Live l 2010-08C-18 VEVO n Free Music Concerts, Original Shows he i U & Discover New Artists ngch 360 Panorama 2010-07-30 Occipital, Inc. 0.99 Photo & Video Color Splash 2009-02-15 Pocket Pixels Inc. 0.99 Photo & Video Diptic 2010-06-23 Peak Systems 0.99 Photo & Video FACEinHOLE - Who do 2009-07-12 Lisbon Labs 0.99 Photo & Video you want to be today? Hipstamatic 2009-12-10 Hipstamatic, LLC 0.99 Photo & Video PicFrame 2011-05-03 ActiveDevelopment 0.99 Photo & Video Camera+ 2010-06-07 tap tap tap 1.99 Photo & Video iMovie 2010-06-24 Apple 4.99 Photo & Video Adobe Photoshop Express 2009-10-09 Adobe Free Photo & Video FX Photo Studio: pro effects & filters, fast 2009-04-29 MacPhun LLC Free Photo & Video camera plus photo editor Instagram 2010-10-06 Burbn, Inc. Free Photo & Video Pic Collage 2011-07-13 Cardinal Blue Free Photo & Video

Alarm Clock Pro 2009-11-05 iHandy Inc. 0.99 Utilities Flashlight ® 2010-07-07 i4software 0.99 Utilities iHandy Carpenter 2008-10-17 iHandy Inc. 1.99 Utilities Skyfire Web Browser - Your Path to Flash Video 2010-11-03 Skyfire Labs, Inc. 2.99 Utilities on iPhone 5-0 Radio Police Scanner 2010-02-18 Smartest Apps LLC Free Utilities Lite (Free) Find My iPhone 2010-06-18 Apple Free Utilities Flashlight ∞ 2010-06-05 iHandy Inc. Free Utilities iHandy Level Free 2008-12-22 iHandy Inc. Free Utilities QR Reader for iPhone 2010-05-02 TapMedia Ltd Free Utilities ShopSavvy (Barcode Scanner and QR Code 2009-11-17 ShopSavvy, Inc. Free Utilities Reader) Speedtest.net Mobile 2009-01-04 Ookla Free Utilities Speed Test textPlus Free Text + 治 Calls : Free Texting + Free 政 2009-06-01 textPlus, Inc. Free Utilities Phone Calling + Free 大 International Messenger 立學

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Appendix 2 - Questionnaires for Survey Personal Information 1. Gender □Male □Female 2. Operating System □Android □iOS Questions 3. If I find a new app with similar features to an app I already own, I will not buy or download the new one since the necessary data stored in the old app are hard to transfer to another app. □Strongly Disagree □Disagree □Average □Agree □Strongly Agree 4. When I buy/download a new app, I expect that it will be easy to learn to use it. □Strongly Disagree □Disagree □Average □Agree □Strongly Agree 5. If I find a new free app with similar features to an app I already own, I will not buy or download the new one since it is unknown to me. □Strongly Disagree □Disagree □政Average □治Agree □Strongly Agree 6. If I find a new paid app with similar features to an app大 I already own, I will not buy or download the new one since立 it is unknown to me. □Strongly Disagree □Disagree □Average □Agree □Strongly Agree 學

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Appendix 3 - Questionnaires for Case Analysis

Advantages and Strategies Questions

Pricing advantages 1. This app was free in the first place but had to be paid for later. 2. Regarding the previous question, this app was still listed on the top charts after the price was changed from free to paid. 3. This was a paid app, and its price was raised at a later stage. 4. Regarding the previous question, this app was still listed on the top charts after its price was raised.

Strategies to raise the barriers 1. This app continuously updates with feature improvements. to entry 2. This app belongs to a series. 3. Regarding the previous question, if yes, there is at least a previous app in the series. 4. Regarding the previous question, if yes, there is at least a previous app that belongs to "apps with long-term advantages."

Strategies to increase 1. This app has a Facebook fan page switching costs 2. This app has a Twitter page. 3. This app's seller has a Blog. 4. This 政app's seller has治 an official Website. 5. This app has peripheral products.大

Strategies to enhance 立1. This app provides a feature for social login. services 2. This app provides a feature for sharing學 on a social network.

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