With the cost of user acquisition being driven up, and market forces driving the value perception of most apps down, it’s tough to make the numbers work on most forms of paid app marketing. A few months ago Marco Arment released sales data on his recently released podcast app, Overcast. Having real data from a great app that converts well provides a flawed, but instructive example of how tough it is to make the math work on paid marketing.
Based on the numbers Marco shared, we see that his average revenue per user is 51¢ (318,996 free downloads generated $164,134 in revenue). Cost per install can vary significantly depending on the app, time of year, and other factors, but as a point of reference, Chartboost estimates the average cost per install on iPhone was $2.08 in December 2014.
Based on those numbers, it appears Marco could not have directly bought his way to profitability with Overcast at current market rates for app installs. To make paid marketing work, you need to find ways to drive the cost of marketing down, amplify the impact, and/or increase the revenue per user.
In the case of Overcast, the app is already converting well (14.7%) and at a relatively premium price of $5. Marco could try subscriptions, a higher price, additional IAP, and other strategies to increase the average revenue per user, but given the fierce competition in the podcast app market, it would be an uphill battle and might not be worth the time and risk to experiment given how well it’s already doing. But that’s not the case for most apps. Most freemium apps (mine included) aren’t monetizing particularly well. Experimenting with price, tracking and optimizing conversions, and working on other aspects of monetization would be time well spent and should absolutely be part of any developer’s long-term strategy.
But I’ll leave monetization for another post. This post is about the marketing side of the equation.
The cost per install numbers referenced above are an average based on mishmash of good and bad marketing strategies. With time and effort, I’m sure an enterprising developer could find ways to drive the cost of acquisition down below those averages. Free marketing helps to drive the overall cost of marketing down and can help boost the effectiveness of paid marketing. And paid marketing can increase visibility on the App Store which amplifies the impact even if the paid marketing isn’t directly cost effective.
Bottom line: unless you are tracking conversions, measuring ARPU, and otherwise tracking and optimizing, spending money on app marketing is likely throwing good money after bad.
Disclaimer: this post has been sitting unfinished for months. I decided to post it as-is. There’s a lot more to say about paid app marketing, but I hope this is a helpful take on the basics.