Even in the past year, the mobile app landscape has changed: It’s vast, complex, and it’s not the most welcoming environment for the new kid on the block. Based on numbers alone, the chances of a new app surviving amidst a sea of more than 2.5 million others are pretty slim.
But the competition isn’t the only challenge facing app developers. In fact, it’s just one facet of the enigma that every single app developer in the market seeks to solve — how to attract and retain a user.
There are plenty of success stories early on of app developers and publishers recruiting users and turning them into loyal customers using traditional methods — but that was before the mobile app ecosystem got so crowded. Now, mobile consumers are harder to obtain and are much harder to retain. Even if a user downloads your app, eventually he or she will stop using or reduce his or her frequency of use.
The cost of acquiring mobile app users is also going up. According to mobile-marketing firm Fiksu, the cost rose 34% from a year ago. The cost-per-loyal-user index, which measures the price of acquiring a user who opens an app at least three times, has hit an all-time high. And for the smaller fish out there, that can mean an automatic app fail.
Apps also face the “discovery dilemma,” which largely has to do with the inability of app store search engines to expose users to the wide breadth of available apps. Since a user cannot download an app he or she doesn’t even know exists in the first place, the vast majority will stay in the dark. Techcrunch recently noted that only “5% of apps accounted for 92% of all downloads in 2013.”
This leaves app developers in a pretty precarious position. Forced to pursue a pay-to-play strategy aimed at bolstering user acquisition through spending to find some sort of visibility, app developers are increasingly burning through their funds, or VC’s funds, well before an accurate understanding about user acquisition metrics can be formed.
“Building a fantastic app requires substantial investment in development, testing and iteration — and it’s never a sure bet,” says Harry Briggs, a principal at Balderton Capital. “But once you produce a hit, you want to deploy your revenues back into growth as rapidly as possible, to sustain the virtuous cycle of App Store rankings.”
But reader beware, Briggs also advises startups to deploy marketing investment only once they know they have a hit on their hands.
So what is an app developer to do? The market for apps has expanded rapidly over the last two years and the rate paid to media properties for a user installing an advertised application (CPI) has for the most part remained relatively stable. In a nutshell, the demand for advertising exceeds the supply, by a lot. And on top of this, the number of impressions required to win a new user is actually increasing, thus reducing the effective revenue per impression (eCPM).
But there is a way to increase mobile app downloads, even taking the aforementioned observations into account. In the Q4 State of Mobile Advertising report we released this week, given the trends seen in the data, we outline four potential keys to success:
First impressions are everything. Performance campaigns can generate substantially higher rates of installations, and therefore eCPM, when the impression is observed early in the user session. High session depth traffic can still generate clicks for brand campaigns, but they generally do not achieve user acquisition (conversion).
Choose your ad platforms wisely. Impression depth is pivotal, which means that the choice of ad platform is just as important. To achieve early impressions, the network must have direct connections to the media property where the user acquisition campaign will appear. And even more, that network’s reach must include the audience appropriate for the target market of the application. in short, direct connections plus robust and the appropriate audience mean success.
Determine how willing you are to go with a higher CPI. If an advertiser provides a high CPI while simultaneously delivering a high conversion rate, that advertiser’s campaigns will take priority over other campaigns. On the other hand, performance advertisers with lower conversion rates must increase their CPI to compete effectively for inventory. This means that in a market where brand advertisers are now competitive with performance eCPM rates, developers seeking new users by using performance campaigns must also compete with brands. And if unwilling or unable to provide the higher CPI, the developer is left to compete for less desirable inventory.
Diversify your monetization scheme. This can include in-application purchases, but also must address different advertising models and how much those models will pay for the available inventory. Without a solid understanding of audience characteristics and behaviors, the value of any app or site’s inventory is reduced.
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