In the Age of Installs and App Rankings, ROI is King
The mobile app market is booming like never before. According to Statista, the App Store and Google Play alone will generate an estimated 179 billion mobile app installs by the end of 2015 (accumulated to date). In terms of revenue, the US alone is forecast to see developers and brands spend an estimated $4.6 billion dollars this year and up to $6.8 billion in 2019, according to Business Insider.
Yet cutting through the noise and getting mobile app installs has never been tougher. Google Play is estimated to have somewhere around 1.4M apps while the App Store already exceeded this number back in 2014, according to Statista. In addition, Singular’s data (which has been amassed across more than 2 billion installs to date) shows that cost per installs (CPIs) continue to increase inexorably. In 2015, Android CPI’s in the US increased by 40% from $1.83 in January to $2.57 by October, while CPIs for iOS increased nearly 35% from $2.97 to $3.99 over the same period.
So if CPI’s keep going up but revenue per user (or whatever revenue-proxy metric used) stays relatively constant, what should mobile marketers do? The only answer (aside from radically reengineering your business model) is to try to find more effective (less expensive) ways to get to the customers you need, and the best way to do that is to constantly test new sources of traffic while tweaking your targeting to find the best segments you can.
At the onset, particularly when such networks are fairly new, the CPI can often be cheaper than more established networks until the ad inventory becomes more scarce. However, every network you add also increases the complexity of sorting through and understanding all your data.
As a matter of fact, sophisticated advertisers such as Poshmark, Glu and Kabam often acquire users across 30 or more sources of traffic at any given time. Add in the fact that managing advertising at scale also requires sophisticated attribution partners to assess where installs are coming from (such as TUNE, Kochava, Appsflyer), as well as in-app analytics solutions like Localytics and Mixpanel which tell marketers how their users are behaving within their app, and you start to understand how aggregating all this data and making sense of the right metrics becomes all the more daunting.
The sheer volume of data that becomes available raises a key a new question: What is the best metric for marketers to track?
Let’s take an example. Assume you’re promoting a new game called Angry Clash Saga (demo example) and that you’re buying ads from multiple sources. Which of the data points below should guide your decision on how to optimize your mobile advertising spend?
Note: Data is fictitious and for illustrative purposes only.
Impressions – this is really your measure of visibility. Impressions are the number of times people see your ad. So impressions are useful for awareness and branding purposes, but there is little to no guarantee that you are promoting to right audience or that people will install your app, let alone use it. In addition, impressions are fleeting; just because a user saw your ad doesn’t mean that person really paid attention to it or even liked it.
Clicks – clicks demonstrate actual consumer interest in your app (though even Google recognized earlier this year that up to 50% of mobile ad clicks may be accidental). However, a person who clicks on your ad doesn’t necessarily install your app, let alone use it. The person might simply be looking for additional information and may or may not return to actually download the app at some later stage. This is even more true on mobile where the steps to acquire a user are more numerous than they are on web. In our case, in order for someone to download Angry Clans Saga our user needs to click on a banner, land on the right product page in the app store, click install, successfully install the app, open the app and then take whatever action is necessary to help us generate some type of revenue. So the actual return is still a long way away!
Installs – the traditional mobile marketing metric still favored by many. The challenge with installs is that an install doesn’t guarantee usage or revenue. Installs are to mobile publishers what landing page visits are to desktop publishers, and in both cases, publishers should be wary about over indexing advertising efforts towards this KPI without looking at what happens once the user enters the app. A user might install your app as part of an offer only to uninstall it later. Alternatively, the person may install your app but never generate a cent in revenue. So the install doesn’t tell you what matters most: the quality (or willingness to spend) of the user. Nor does it tell us how long that user might stick around or whether they might invite friends to use the app as well. In our example above, Network 5 and Network 2 are the clear winners but are also where we spend the most money and, in Network 2’s case, where we have the highest cost per install (CPI).
CPI – another traditional measuring metric is Cost per Install. CPI helps you understand what each user costs you to acquire and is generally the main metric to compare the cost-based performance of one mobile advertising channel versus another. The problem with optimizing based on CPI is 1) it doesn’t tell you whether this user generated any revenue and therefore 2) it doesn’t give you any idea about the real “value” of that user. Again, CPI misses the key question around what the actual value of that user is. Now most marketers might think “let’s just focus on the network with the lowest CPI”. That’s not a bad way to rationalize your spend but if you look at our example you’ll see that although Network 1 gives you the lowest CPI at $7.04, it actually doesn’t generate as much ROI as some other ad networks which have a higher CPI (Network 3, Network 2, and Network 4 are all more expensive but generate better returns).
Revenue – This is the overall revenue generated from all users across a campaign over a certain time period. Mobile marketers typically look at 1d, 7d, 14d and 30d cohorts of revenues. While useful, the challenge with revenue is that it doesn’t take into account the cost of acquiring those users. In our example above we see that Network 5 generates the most revenue. However, it doesn’t give us the highest ROI given what we’re spending. Network 5 performs well but is still 3rd in ROI behind Network 2 and Network 3 in our example.
One metric to rule them all: ROI
If your business doesn’t derive revenue directly from specific in-app actions, don’t worry, you’re not alone. In fact, many app developers are just like you, and there’s still an ROI-like metric for you too. Skip to the next section for more info.
Though the example above is purely illustrative, most savvy marketers agree that ROI is the best way to go and that teams should strive to understand how to influence ROI at the most granular level possible. ROI shows the cost to acquire the revenue we’re getting, and shows us, in percentage, how much of our original investment has been returned. This gives us a metric which we can then use to compare how each one of our advertising programs is performing. In general, we would like to optimize channels to produce the best ROI possible. (i.e. acquire the highest quality users at the lowest cost).
It’s worth noting, however, that strict accounting measures don’t calculate ROI in this manner. Conventional ROI is defined as the ((revenue – cost) / cost) or how much “incremental” revenue is left after you factor in cost.
The best way to optimize your channels is to identify and boost the ones that are particularly effective at targeting the segments you desire, while eliminating the inefficient ones. In order to do that, you have to look deeper into the data and do a granular analysis. So while understanding your ROI at the “ad network level” is a great start, you MUST push yourself to go deeper to be successful at optimizing mobile ad campaigns. Using Singular you can get a whole lot more granular and even understand ROI at the campaign, sub-publisher and even creative level. We’ll talk about these in more detail in the weeks to come.
What if you don’t have / don’t track ROI?
Many app developers do not derive revenue directly from specific in-app actions, but rather indirectly by having the user take a certain action which might eventually be revenue-generating. In those instances, there is still an ROI-like metric, but not a direct one.
For example, as a commerce platform you might be tracking the average number of items placed in a user’s shopping cart compared to the cost of acquiring that user (Items per Cart / Cost). A ride hailing app, for example, might be more interested in measuring the # of rides / cost of acquiring those rides. The principle is basically the same. Even though you’re not tracking the ratio of Revenue / Cost, you’re still tracking a core revenue-generating metric compared to the cost of driving that action.
As a matter of fact, many of Singular’s customers actually track these types of vertically-specific custom metrics and our platform is actually uniquely set up to enable them to do just that!
We hope you agree that ROI is really “the One Metric” that matters when assessing how your mobile marketing campaigns are performing. Singular’s mobile marketing platform allows you to quickly and easily make sense of your data by pulling all your mobile ad spend and in-app revenue into a single place to allow you to make side-by-side comparisons based on ad networks, operating systems, country’s, demographics, campaigns, creative units and sub-publishers. Be sure and check out our next post where we’ll go “deeper down the rabbit” hole and show you just how granular you can get with our upcoming Singular Stack product.
For more information on how Singular is helping make mobile marketers’ lives easier and how our platform helps unify all your mobile data needs in one place make sure to visit our website and request a demo!
Patrick Mork – The Marketing Guy