Bought media is used by most companies, big and small, to grow their user base, climb up the store charts and reach the masses. However, navigating the paid user acquisition sea is a tricky challenge, which requires a successful strategy.
Why buy media?
Knowing that everyone else is doing it is not enough of a reason to get started on paid user acquisition. It is definitely a good indication that it is benefiting similar companies and that there is a huge potential here for big and small companies alike, however one must first understand the specific benefits that such an activity will gain for the mobile app.
Volume is definitely a key goal. Reaching mass audience has several related, yet distinct benefits. Gaining high quantities of users for your app will grow your database. This will increase the valuation of your app, enable you to perform more accurate user behavior analysis, enable you to remarket and cross market to these users, will result in more friend referrals, and will significantly impact your store ranking, which in turn will lead to free additional users.
Positive ROI (Return On Investment) is the real name of the game. Apps that are able to generate more revenues from the users, than it costs to buy these users, enter a positive cycle of user acquisition, in which the more users they buy – the more profit the app generates.
So, how can you get there?
Assuming you seek to reach both volume and positive ROI, we first have to define ROI = LTV / CPI, where LTV (Life Time Value) is the average revenues that your app’s users generate over their lifetime, through whatever monetization method that is in place (most commonly it is either in-app purchase and/or ads inside the app).
To your LTV you may add a factor to take into account the virility element of the app and the impact on store ranking, so if for every bought user you get 0.5 additional users from friend referrals and store ranking then you should increase your LTV number by 50%.
CPI (Cost Per Install) is the average direct cost to acquire a user for your app. Most networks sell users based on cost per install (CPI) so there is usually no need to calculate it unless you buy on CPC or CPM. To reach positive returns on your marketing, all you have to do is to make sure that LTV > CPI.
How to plan ahead:
Which tools are required?
It is strongly advised to test your app well before launching a massive campaign. Once you feel that the app can take on high volumes of users, you will need very few tools to get going.
The first and most important tool is a third party tracking platform. These tools are unbiased platforms that enable you to attribute which channels and partners help you acquire, engage and retain users. There are about 10 such platforms, out of which about 2-3 dominate the majority of the mobile industry, for example, MobileAppTracking and AppsFlyer are definitely the two leaders in the category. Once you have it’s SDK in place, you are able to easily work with any of the hundreds of mobile networks that are integrated with these platforms.
Apart from tracking, in most cases you will be required to provide marketing creative, i.e. banners. It is advised to start with 3 or 4 sets (concepts) and resize them to the few most popular sizes. Regular GIF or JPG format are the most common standard. If you target non English countries it is advisable to have banners in the relevant languages (even if the app doesn’t have these languages).
That’s mostly it in terms of technical requirements for user acquisition.
Segmentation and Targeting
So my app is geared towards woman between the ages of 40-55 with a college degree and an interest in pets. Targeting the most relevant user audience for my app is the way to start, right?
Wrong. It is crucial to target the right segments but they might be hiding in places other than you may think. In addition, targeting a specific audience, for example on RTB exchanges, carries exceptionally high costs that usually result in negative ROI. Most app developers and networks target just by OS, geographic location and traffic Type. Additional targeting in mobile, such as by gender, age, interest, or city, is possible, however it is complex, not common, and significantly limits the available inventory of traffic sources. The end result is that it’s not cost effective and is almost never used by any of the main developers and is not available by most networks, especially on the CPI model.
However, segmentation and targeting is your safest bet to reach positive ROI. This is achieved by optimization based on numbers and results per segment:
On the global average you may find it hard or impossible to reach positive ROI, however you might be able to find your profitability in a specific segment. Such segments are usually a combination of OS X Geo X Type X Source. For example, it might be the case that the LTV you get from Android users in Thailand, for incentivized traffic, from a specific traffic source, divided by the CPI for these users, yields a much more favorable ratio compared to other such segments. This means that you should follow the profitability trail and target that segment.
The most common segments by which you should slice your numbers are:
OS: iOS vs Android
In general, Android CPI rates are about 20-30% cheaper compared to iOS. The flip side is that iOS users are prone to spend more money, so they are worth more (higher ARPU).
ARPU and CPI rates, for a free app, vary per country. In general, the pricing roughly correlates with the financial strength of the citizens of that country (GDPPC). There are no set rules and there are several additional parameters that influence the variation of rates across countries, however, you can usually expect to pay for Tier 1/western (or western-like) countries, about twice as for markets such as LATAM, Eastern Europe and most of South East Asia. Whereas users from countries such as India, Pakistan, Africa (except for SA) and Arab countries (except the Emirates) may be delivered at less than a third of the cost of Tier 1 countries.
Most western developers mainly target the United States as the LTV is high and the available population is big. This causes CPI rates to stay very competitive there. Asian developers recently increased the competitiveness in their markets. Therefore, try to find signs for a sweet-spot in less targeted markets. If you do find them, make sure to translate your app to the local languages and even local themes.
Type: CPC vs CPI ; Incentivized (rewarded) vs. Non-Incent:
CPC (or CPM) models are used by the largest networks, such as Google and Facebook. These networks offer very high volumes of traffic as well as the ability to target specific segments. However, buying traffic on CPC and CPM usually results in a higher CPI and consequently and negative ROI, especially when trying to scale up campaigns. The main benefit on CPI campaign is the minimized risk for the advertiser as the cost per new user is guaranteed in advance.
Incentivized campaigns are when the users get an incentive to install your app. This incentive is usually in the form of virtual goods or virtual currency in another app.
Incentivized users are usually much less interested in your app, so they are less expected to become active users in your app and are prone to delete the app from their phones faster than other users. However, they are also much cheaper compared to non-incent users, at about ⅓ to ⅕ the cost.
So why do so many developers buy incentivized users? There are 3 main reasons:
Not all sources are created equal. In fact, LTV variation by traffic source is usually greater than by country or OS. Therefore, it is crucial to choose the right networks to work with, and in case the network provides low quality traffic, to replace it with another.
In addition, advertising networks usually send traffic from a variety of sources. These can be anything from 1 to 100 or more sources. Traffic quality and relevance for your app varies significantly between sources. Therefore, it is crucial to make sure that the network passes back to you the source ID (usually referred to as sub_id) so you may optimize based on sub source. Getting traffic from a network with many sources is a key element for reaching positive ROI.
Some networks may do this work for you (if you allow the network to get the info on an additional event, past the install, the network can optimize it’s traffic sources for you). It is not uncommon to see that one source has a conversion rate of 70% from install to tutorial finish, whereas another traffic source has a 5% conversion rate. A decent network will immediately pause the bad performing source without waiting for your feedback!
The most commonly used optimization method in the performance-based realm (also historically) is to start wide and, based on the tracked and measured results, narrow down to the best performing segments. The above segmentation options should be used to reach the right matrix of the best performing segments of OS, country, type, and source, which produce a ratio of LTV > CPA.