With Rising User Acquisition Costs, App Marketers Need to Be Smarter

By Ioana Cailean on January 16, 2014 5 Comments

Update: Take a look at our newest post and infographic on User Acquisition Costs here.

It is now more costly than ever for developers and app marketers to acquire new quality users for their apps. On average, it now costs developers $1.79 to acquire a quality user, defined as a user that will open the app at least three times. That’s up 30% from November 2012, so it’s imperative that app marketers are taking an intelligent and efficient approach to advertising.*

Users Cost More Than They Are Worth

Many within the industry are fixated on finding low CPI prices and building a large and wide encompassing user base, but that approach is rarely fruitful. A prime example can be found within the gaming vertical.

SuperData estimates that the cost per install was $2.73 for mobile games, compared to an average revenue per user (ARPU) of just $1.96. For the holiday season, SuperData estimated that the CPI would be more than double the ARPU.


Similar trends exist within other app verticals such as travel and commerce, where acquisition costs can be even higher than within the gaming vertical. Fueling the rising cost of user acquisition is the deep pool of competition. Both Apple’s iOS App Store and Android’s Google Play Store now each have more than one million apps available.

The simple reality is most apps will fail. Analyst Gartner predicts that through 2018 less than 0.01% of consumer mobile apps will be considered a financial success by their developers.

In-App Purchases, Re-Engagement Are Key

What will drive mobile app revenue are in-app purchases (IAP). As freemium apps continue to be more prevalent, Gartner forecasted that IAP will account for 48% of all app revenues, up from 17% in 2013 and just 11% in 2011.  As it stands now, about 90% of paid apps are downloaded 500 times or less daily and make less than $1,250 per day.

To generate IAP, engagement and re-engagement need to be focal points of an app marketing campaign. SuperData also tells us game developers will have to keep players engaged for two months or more before they can start making a profit from their mobile game.

The best way to spur on engagement is by continuing the communication with your users beyond the point of acquisition. A successful tactic to do so is 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.

Retargeting is an effective engagement/re-engagement tool because it allows app marketers to communicate to users on a 1-1 basis. This ensures users are only receiving information that is uniquely relevant to them. Smartphones are highly personal belongings, so the messages that users on these devices receive should also be personal.

*Source: Inside Mobile Apps