Are iPad Users Buying What Microsoft Is Selling?

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. 

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. 

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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Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2014, at 11:53 AM, bobbyedwards wrote:

    First I doubt if Apple gets 30% of subscription, as selling partners don't get close to that.

    Second what you forget is that many people who own an iPad have had an Office 365 subscription for some time.

  • Report this Comment On April 14, 2014, at 12:07 PM, marv08 wrote:

    "But if PowerPoint, in particular, remains such an underperformer, Microsoft should due a cost-benefit analysis to decide whether that particular app should continue."

    Not sure I agree with this line of argumentation... As you said yourself, the downloads are free, and the distribution has no effect on revenues at all. A lot of iPad users will have Office 365 subscriptions already, so there is no revenue added at all. Others will download and use the apps for free, just to view and present Office docs (while creating them on a PC or Mac). Pretty much all Mac and iPad users know that Apple's Keynote is a much better presentation tool than PowerPoint, so the urge to download it might be quite a bit smaller; still having PowerPoint for compatibility reasons and for access to presentations stored in OneDrive or Sharepoint is important, as the solution would be incomplete without it.

    MS is keeping many less successful products, like Access and Publisher, alive since ages. Because not having them would force some people to look elsewhere. So, the value of these products is maybe greater than what the revenue figure might suggest, as they keep customers from leaving.

  • Report this Comment On April 14, 2014, at 12:38 PM, techy46 wrote:

    Apple doesn't get any of the Office 365 subscription fee. You Fools, Microsoft did not come to Apple's iPad users out of desperation, it's offering real productivity apps for real users. Who cares what the majority of iPad users are doing like viewing videos or playing worthless games..

  • Report this Comment On April 15, 2014, at 12:30 AM, Bozly999 wrote:

    Does anybody proof read this before you publish it?



    "The familiar names making the leap to the iPad were Microsoft Office, Excel, and PowerPoint."

    - "Office" is not am App. "Word" is the app that the author missed.




    "Since an Office 360 subscription would include all three products,...."

    - The product name is "Office 365."Not '360'


    How can we take your opinion seriously if you don't even get the names right???

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Brandy Betz

Brandy Betz has written for The Motley Fool since 2011 and primarily covers health care, ETFs, and dividend stocks. You can follow her on Twitter @BrandyBetz.

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