Analyzing the Impact of User Behavior and Paid Advertising on App Revenue: A Case Study of Reelshort

Abstract

Background Information:In early 2022, Chinese online short dramas, known for their low costs and quick production cycles, entered the international market. By mid-2022, Crazy Maple Studios (CMS) launched Reelshort, a global short drama app, which quickly established itself as a market leader. By October 2023, Reelshort surpassed TikTok in North American downloads, and as of April 2024, its net revenue exceeded $80 million. Research Question: This research centers on Reelshort and examines several key factors that affect its total revenue, including the amount of paid ad placements, user behavior, downloads, pricing strategy, and the impact of revenue in North America on total revenue. Research Methodology: This research employed both qualitative and quantitative methods. The qualitative analysis explored Reelshort's pricing strategies and revenues, while the quantitative approach used ridge regression to assess the relationship between key variables. Reelshort's total revenue was the dependent variable, with user behavior, advertising, downloads, and North American revenue as independent variables. Additionally, a mediated effects model examined how advertising and daily user activities influenced revenue through downloads. Research Findings: The North American market significantly boosted revenues, while advertising expenditures negatively impacted Reelshort's revenues. Overpricing can negatively impact long-term revenue. Additionally, increased user engagement and advertising spend could lead to more downloads, which could increase revenue.