Mobile Advertising: Evolving Past CPI

Mobile Advertising Evolving Past CPIThe following is a guest contributed article by Joseph DeLuca, a mobile marketing analyst at Trademob.

Thanks to rapid growth and the constant influx of new technologies, mobile advertising has become one of the most dynamic markets in the world. Within this market, in-app advertising is the fastest developing sector, and is set to be valued at $7 billion by 2015.

App marketers have long been fixated on user acquisition and obtaining the lowest cost-per-install (CPI) prices possible. However, it is now important for marketers to include more sophisticated and relevant mobile advertising tactics into their overall strategy while continuing to gauge the effectiveness of their campaigns using advanced metrics. The end result will be a more effective communications channel for app developers and advertisers that is also more relevant for consumers.

Don’t Stop at Acquisition – Continue the Communication

One of the biggest mistakes made by mobile advertisers is the failure to continue the communication process with their existing user base (or not investing enough resources or effort into doing so). User acquisition is simply the first step of the mobile app marketing journey. Once you’ve built your user base, it is important to then facilitate engagement and ultimately drive purchases.

Less than 5% of acquired users become paying customers, while 69% of users will only open an app 10 times or less. No matter how low your acquisition costs are, if those users are not opening your app then you’re simply throwing away money. And from a budgetary standpoint, re-engaging an existing user costs one-third as much as acquiring a new one.

SuperData estimates that the average CPI in October 2013 was $2.73 for mobile games, compared to an average revenue per user (ARPU) of $1.96. For the coming holiday season, SuperData estimates that CPI will be more than double ARPU, which means that game developers will need to keep players engaged for at least two months (or more) before they can start making profits.

Even if concerted efforts are made to acquire high-potential users, it is likely that engagement will eventually drop. In fact, 62% of users will abandon an app just one month after acquisition.

Reaching Your Current Users

Many app developers simply rely on push notifications to communicate with their existing user base. However, these messages are only received by a fraction of users. According to Business Insider, only 30% of iPhone users accept push notifications, which means that 70% of an app’s audience simply isn’t receiving the message. Furthermore, these figures don’t take into account the countless number of users who uninstall an app simply due to the sheer annoyance caused by push notifications, which is why more sophisticated tactics must be incorporated.

There are several ways to communicate to existing users, but the most effective tactics are always those that market to the consumer on a 1-1 basis. Thanks to advances in targeting, retargeting and tracking on the mobile platform, such marketing is now becoming possible. Smartphones are highly personal belongings, so the messages that users on these devices receive should also be personal.

The best way to provide such communication is through retargeting campaigns. By targeting specific users based on their mobile behaviors and actions, unique ads can be served urging a user to open an app or to perform certain actions within the app. This is an effective tactic for reactivating dormant users who cannot otherwise be reached, or for increasing the lifetime value of an engaged user by offering him/her a special voucher.

Analyzing Results

As mobile advertising continues to evolve, the metrics we use to gauge the effectiveness of campaigns must also evolve. Gone are the days of solely designing campaigns based on attaining the lowest CPI possible.

Standard engagement metrics such as monthly active users/daily active users (MAU/DAU), open rates, and session times can also be misleading; The vast majority of users will never spend a cent, even if they are actively using your app (this is especially true for gaming apps).

Customer lifetime value (LTV) and average revenue per user (ARPU) are good metrics to start with when analyzing your user base, since they are directly related to revenue. Although they don’t tell the whole story, engagement metrics should not be neglected. Analyze carefully and in accordance with the business model of your app. You should also monitor your long-term retention rates as well as your cost per reopening (CPR) in order to facilitate the dissection of a retargeting campaign’s effectiveness.

The most important thing is to establish custom metrics that are most relevant to your app. For example, if you have a retail app, average basket size and transaction frequency are important metrics. If you have a gaming app, in-app purchases (IAP) are most relevant, and for a travel app, rebookings are important, etc.

Though it seems obvious, many app marketers fail to understand that continuous communication with customers is crucial to success. The app marketing journey doesn’t end with user acquisition – this is merely the beginning of the relationship between you and your users.