The largest segment of mobile advertising today is focused on getting people to download a mobile app – marketers spend three times more on that than they do on mobile search ads. It’s easy to understand why. Marketers like “app install” advertising because it provides an easy and simple ROI: I spent X, and Y people downloaded the app.
However, as is often the case with digital advertising, this is alarmingly short-term thinking. Marketers need to be far cleverer and move past using a simple cost-per-install metric to measure ROI.
Why? Because of the enormous amount of user churn.
The clogged reality of app usage
There is an inherent limit in terms of the time people can spend on new apps. Eventually, ongoing growth will no longer be sustainable as it’s difficult to get people to spend an incremental amount of time on new apps.
Consumers have an average of 89 apps installed on their smartphones but they only use 25 of them each week and only eight apps daily.
More crucially, however, is that only around 10-20% of mobile app users remain post-download and the typical app only retains around 5-10% of users beyond 30 days. In fact, communications / social apps are the only app category to retain at least 20% of users after 30 days, while lifestyle and travel apps retain the lowest at 5%.
Moving beyond cost-per-install to lifetime value
So, let’s say you spend £50,000 on an “app install” ad campaign which generates 10,000 people downloading the app. Thus, your cost per install is £5. Not bad.
However, the reality is that after 30 days only 5-10% of them (500-1,000 people) will still use the app. Thus, in effect, you’ve paid between £50-£100 for every person who installed the app and used it beyond 30 days. Suddenly, the cost per install for any form of valuable user looks a whole lot worse. It is this figure which is effectively the true cost of acquiring mobile users.
This level of churn and the fact that the remaining loyal users drive between 75-100% of app revenue is why marketers need to move beyond the basic cost-per-install metric to a better understanding of the lifetime value of an app user. It’s about using retention to measure the true value of a mobile app user.
As a slight aside illustration, a study we did last year showed that for an average productivity app, you can make a profit if you earn £13.85 for every loyal user if the cost-per-install across all users is £5.40.
How to find high lifetime value users
If you can understand how you found high value lifetime users, it means you can focus more accurately on identifying the strongest potential new users and avoiding the 90-95% of fleeting users. This leads to a much more effective mobile marketing strategy.
So, how do you so this?
Whether you’re a marketer, mobile app developer or digital publisher here are a few key metrics you can use to get an accurate picture of your app retention and how it compares to your competitors:
• Number of downloads and timing (hour, day of the week)
• Number of active users during and after the first 30 days
• Time spent in the app and the number of sessions users allocate to a single app versus other on-device activities • Whether a complementary or competing app was installed and used during the first 30 days
• Device type (e.g. iPhone, Android)
• App discovery source (e.g. App Store, Google Play, referrals, advertising, search)
• User demographics (device ownership, gender, geographical location, age)
These metrics provide a framework for understanding churn and retention patterns and provide a more accurate measure of the value of a mobile app user, the value of mobile app advertising over the long term, and the true cost of user acquisition in the mobile ecosystem.
By Mike Read, senior vice president Europe at Verto Analytics
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