Are iPad Users Buying What Microsoft Is Selling?

Which Microsoft Office app isn't carrying its monetization weight?

Apr 14, 2014 at 11:00AM

Microsoft (NASDAQ:MSFT) brought three of its most popular productivity products to Apple's (NASDAQ:AAPL) iPad late last month. The software apps were free to download with limited functionality but required a recurring subscription for full use. Those subscriptions serve as the key reason Microsoft came to Apple's platform. But are all three products pulling equal monetization weight?

The familiar names making the leap to the iPad were Microsoft Office, Excel, and PowerPoint. Customers wanting full access -- including the ability to create and edit files -- have to sign up for an Office 365 subscription, which starts at around $100 a year. But those subscriptions include the full range of what was once considered the Office suite. That means a user could use Office, Excel, PowerPoint, and more with one subscription.

So it doesn't really matter which app iPad customers download if it leads to an Office 365 subscription. But the apps still take time and money to maintain, and Apple gets a 30% cut of the sales. So it's worth knowing which software has attracted the most monetization through the iPad.

How well has each Microsoft iPad app monetized? 

All apps aren't created equal
Analytics firm Distimo ran some numbers to determine which of Microsoft's iPad apps has monetized the best in these first two weeks. The first part of the puzzle came from looking at how many free downloads each program received, as this can serve as a sort of baseline for the popularity of each product when cost isn't a factor. 

Distimo Microsoft Ipad Free

Source: Distimo 

As the infographic states, Microsoft Word led the pack with 39% of the total downloads for the trio. But overall, the downloads were fairly even between the products.

The bars weren't as even on the graph representing revenue. 

Distimo Microsoft Ipad Revenue

Source: Distimo 

Microsoft Word leads again, but this time with a whopping 55%. Excel came in second with 32%, and PowerPoint trailed behind with 12%. Why the revenue imbalance? 

Since an Office 360 subscription would include all three products, the revenue disparity likely comes down to the fact that Word users are more inspired to buy a subscription. Word has become ubiquitous in both corporate and academic life and thus appeals to a wider range of users. Some people may have downloaded the free versions of Excel and PowerPoint more out of curiosity and simply made the subscription through Word because it was what the customers were actually using. 

What does this mean for Microsoft?
All three iPad apps have proven to be popular downloads for the free versions. But the uneven monetization means that Microsoft should keep an eye on the long-term performance and make changes as necessary. It's not a particularly good time for the company to lean on even one weak app. 

Microsoft came to Apple's house out of desperation, as the PC market slumps and the Windows 8 operating system remains unpopular. The company can't rely on selling Office products only to those using Windows tablets because that's a comparatively tiny group. According to research firm Gartner, Microsoft held a mere 2.1% of the tablet market in 2013, compared to Apple's 61.9% market share.  

 Foolish final thoughts
This is still early data on how the Microsoft iPad apps will monetize. Ultimately, it doesn't matter which app the subscription comes through. But if PowerPoint, in particular, remains such an underperformer, Microsoft should due a cost-benefit analysis to decide whether that particular app should continue. 

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Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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