Back in 2021, we took a look at rising customer acquisition costs (CAC). A perfect storm of increased competition and Apple’s privacy changes made for increasing CAC. Now, in 2022, there is another layer contributing to mobile app marketing spending: uncertain economic times. This has put a new focus on CAC.
“I believe that quality has become the utmost priority as budgets have become more conservative — and more attention has been paid to these campaigns from key stakeholders within the business,” Gabe de la Cruz, FeedMob’s Director Of Operations and Strategy, said in a Q&A on the company’s website. “With the number of uncertainties, both within and outside of our industry, acquisition managers are being asked to do more with less. This has led to more risk aversion and the need for more confidence in the supply.” With this in mind, UA managers are focused on the quality of ad inventory as well as new users. So we thought it was time to take another look at CAC.
What does app marketing cost?
Every app vertical is a different animal. What it costs to acquire a new fintech user is very different from what new gaming users cost – and the strategies to find those users differ greatly. That being said, there are some general assumptions we can make. For instance, Business of Apps compiled a list of what it costs to market an app:
- App market research: $5k – $15k
- App beta testing: Up to $5k
- ASO tool: $25 – $1,500/month
- App marketing agency pricing: Up to $25k/app
- App PR outreach: $100 – $300/hour
- Influencer Marketing: $10 – $18k/month
- Average Cost Per Install (CPI): $1.75/install
- Cost Per Action (CPA): Register – $3.5/install
- CPA: In-app purchase – $87/install
- CPA: Purchase – $75/install
- CPA: Subscribe – $37/install
Installs are still relatively cheap, but if you want a user who subscribes and makes purchases, it’s going to cost you a pretty penny. And this is happening at a time when first-party data from subscribers is more important than ever, and for some app types (such as fintech or e-commerce), an install is almost worthless unless it’s followed up by a subscription and an action (such as making a deposit).
Focusing on quality over quantity
For the past few years, there has been a movement among UA experts to stop focusing so much on installs and get focused on retention. Now, however, UA managers are more discerning with their budgets. This means getting focused on finding high-quality users, which – in the privacy age – has meant being open to new channels.
“As clients have shifted to find higher quality traffic, they aren’t able to reach the same scales they previously achieved,” de la Cruz said in his Q&A. “This has led them to embrace experimentation and test more partners. For instance, we have seen increases in spend across all of our client verticals on DSPs and Incent Partners. Clients that have tested on these types of partners and have seen success, have generally grown in willingness to test new partners.”
Many of the biggest advertising platforms – like Google or Facebook – have been impacted by App Tracking Transparency, forcing app marketers to look beyond these traditionally popular channels for new sources of users. This is a huge task, as there are many possibilities and the testing it takes to optimize these channels is often beyond a small UA team’s capabilities. However, many at-scale app brands already know the importance of diversifying beyond the duopoly, and as app marketing budgets grow tighter, UA managers are willing to branch out to bring down UA costs while increasing user quality.
Mobile retention resources
- Push Notifications And In-App Messages For E-Commerce Retention And Engagement
- 7 Tips to Increase App User Retention with Effective Onboarding
- Four Simple Tips To Boost App Retention And Engagement
- Retention First: An Essential Strategy for LATAM
- Lessons in User Retention from the Mobile Gaming Industry
- Level Up: Using retention marketing tactics to up your game
A renewed focus on the experience
Many startups have relied on product-led marketing to build a following. Essentially, great products need no introduction, and companies rely on users to spread the word. Blockbuster apps like Slack and Dropbox famously used this tactic early on. With user acquisition challenges and costs mounting, mobile apps are renewing their commitment to great user experiences to help win the battle for users. And these experiences extend beyond the confines of an app.
This emphasis has given rise to a new metric: return on experience (ROX). As Adjust describes it, “Return On Experience (ROX) is a metric which allows marketers to examine how consumers interact with their brand and measure how their investments in customer experience are impacting their bottom line.”
Unsurprisingly, in our privacy-focused era, first-party data is essential to understanding ROX. All personalized digital experiences are driven by data, and after the deprecation of IDFA and in anticipation of Google’s looming GAID changes, first-party data is becoming increasingly valuable. This should not surprise mobile marketers, however. App marketers have always known that in-app behavior is integral to not only building better experiences to retain and engage existing users but can also help you better understand which users are valuable and how to find more of them.
As tracking user behavior outside of apps becomes more difficult, it’s more important to gather your first-party data which means compelling users to provide their information – often via subscriptions, sign-ins, or other means of data collection.
Stop focusing on customer acquisition cost
For many apps, reducing CAC is a priority, but that may be misguided depending on your vertical and your goals. For instance, if it costs you $25 to acquire a new user for your e-commerce app, that may seem like a steep price to pay. However, if the average first purchase amount for new users is $50, the price may be worth it. Refocusing your UA strategy to zero in on quality users who are likely to convert and become high-LTV users may be the new path to success.