We all know that mobile apps are expensive to build and maintain, and they are hard to monetize. Mobile users have the expectations that apps should be free. And competition is very high, with thousands of mobile apps going live every day. For publishers who monetize through ads, this creates a level of complexity behind acquiring and engaging profit-generating users that is, simply put, confusing and frustrating. Whether it’s time, money or lack of another vital resource, it is clear that most mobile apps are not equipped to handle the obstacles coming their way.
To offer a clear understanding of how a mobile app business can scale through ad monetization, we looked at what successful mobile app businesses have in common. And identified three shared user acquisition and user monetization strategies:
Optimizing campaigns by increasing conversion rates and Lifetime Value
Optimizing marketing campaigns requires a strategy that goes beyond installs. Two additional goals you should be striving to achieve are 1) driving profitable conversion rates and 2) increasing Ad Lifetime Value (LTV). So let’s take a closer look at both.
LTV is “the lifeblood of your business,” as Lloyd Melnick, Director of StarsPlay at The Stars Group, puts it. It is calculated by combining insights from three important ad revenue components: Monetization (which includes ARPDAU and ARPU), Retention (how often are users engaging with your app), and Virality (new users coming in). It’s worth noting that every app might measure LTV slightly different from the next, which makes it a challenge to calculate. It’s not set in stone; it shifts and changes with user behavior. Which is probably why so many apps either don’t do it or are unable to achieve optimum results. But the ROI in taking the time to figure it out — and do it right — is what will make or break your app business.
Conversion rates is another vague term, with many formulas floating around. For many, conversions equate to how many people install an app after seeing an ad; however, a more meaningful definition is how many installs actually convert into active (or regular) users. With the second, more profit-focused definition, you can calculate conversion rates by following the journey a user took after they view or click on an ad. Did they install your game or app?
And did they then begin to use it on a regular basis? Tracking their journey through the entire engagement process shows the real business value of ad placements, and allows you to make adjustments based on actual measurable results.
Tracking, analyzing, and connecting the dots between UA and Monetization metrics
We already touched on the importance of going beyond installs to optimize conversion rates and LTV. But how do winning mobile apps track and analyze the different data impacting LTV, conversion rates and other shifting ad revenue metrics?
First, lets review the most important monetization metrics you need to track in order to support profitable User Acquisition campaigns:
- Impression (which can be can have different cost models: CPM (Cost per Mille), CPI (Cost per Install), CPC (Cost per Click), and CPA (Cost per Action)
- Effective cost per mille (eCPM)
- Display Rate
- Average Session Count per User
- Average Session Length
- Average Revenue per Daily User (ARPDAU)
- eCPM Decay (Effective Cost Per Mille)
You don’t have to be a multi-million dollar profit generating app to know that you need to be continually analyzing these metrics, and in turn the insights they provide. The complexity comes when you begin to identify which metrics to look at and how to combine them in order to solve specific needs and challenges.
For instance, if you need to calculate the most suitable period between displays and estimate the expected number of ad impressions per user, you need to combine Average Session Count per User and Average Session Length. And if your user base is global, it’s important to remember to look at the ARPDAU of each country separately to ensure accuracy, as the price of advertising and user behavior change with each region.
A new metric from the list above is eCPM Decay. This metric is very useful because it gives you a term for what happens when your eCPM inevitably starts declining. It’s difficult to control, and the reasons for why it occurs are many. But you’ll be better prepared if you track it and have a plan in place for what to do when you see the first signs of decay. Some of the tactics you can take to minimize eCPM decay include switching up ad placements, slowing the rate of ad placements, and adjusting CPM floors.
Making sense of all of these metrics is difficult to do manually. This is why most successful mobile apps use ad revenue attribution to interrogate the data and pull out the most useful insights. It’s a relatively new technology that serves as a stand alone attribution tool or an extension to in-app revenue attribution. And its purpose is to reveal the path between active users and revenue coming in, allowing you to optimize your investment in current and future UA campaigns. The way you integrate ad revenue attribution depends on your business model, whether you monetize through ads only or use a combination of in-app purchases and ads.
Embracing new technologies to scale your business
We’ve already touched on a few tools like ad revenue attribution, but there are other innovative technologies you might not be using that can help you build a stronger foundation for scaling your mobile app.
Your future success lies in advertising your mobile apps on a diverse set of channels — beyond Facebook and Google. While they are tried and proven UA channels, they are not the only options. Both are becoming increasingly more costly. Advertising on other mobile apps, for one, is a great way to market your app. A technology that allows you to do this successfully is programmatic ad buying, which can be done through programmatic ad exchanges via demand-side platforms (DSPs). One of the highest grossing mobile game developers, Playrix, started using programmatic just a year ago and has already doubled the install growth of four games for 40% less spend.
For the purpose of acquiring new high-quality users, a new and highly effective tool is the playable ad format. It engages users by allowing them to demo a game or app before downloading it. Playable ads give users what they want — compelling and interesting experiences — and publishers what they need — downloads by users who have already engaged with an app and are interested in experiencing more. Playable ads give you the spark you need to showcase the value of your app or game.
Machine-learning is another powerful technology. One use case is applying machine-learning to User Acquisition in order to optimize ad campaigns. What makes machine-learning so effective is that it learns and grows with you. As more and more data is plugged in, insights become more powerful and more accurate. This allows bids to be readjusted dynamically to find the highest pricing, while avoiding overbidding. Audiences who are more likely to convert are targeted more accurately. The best converting ad creatives are identified and served more often. And apps with low conversion rates are blacklisted, while apps with high conversion rates are prioritized.
- To convert installs into profits, you need to make profitable conversion rates and LTV your primary goals.
- Understanding how to use and analyze key monetization metrics helps optimizes UA campaigns, while ad revenue attribution takes the guesswork out.
- New technological trends like machine-learning user acquisition, programmatic ad buying, and playable ad formats scale profits by identifying high-value users, and engaging users before they even download your app.
Interested in learning more about how you can acquire more profitable users with Stack? Find out how in this post.