App Marketing Conversations: The, Continual, Rising Costs of User Acquisition
In this weeks App Marketing Conversation’s, Ryan Morel of GameHouse, Robi Ganguly of Apptentive, and Ian Sefferman of MobileDevHQ by Tune discuss a continual theme – the rising costs of user acquisition for iOS & Android mobile app marketers. Watch the discussion here, or read the transcript below.
Ryan: Hello and welcome to another addition of App Marketing Conversations. I am Ryan Morel with GameHouse. As always, I’m here with Ian Sefferman of – is it just Tune? Or it’s MobileDevHQ by Tune?
Ian: Either way, yeah, we’ll go with the latter.
Ryan: Okay, cool, Tune. And Robi Ganguly from Apptentive. So today, we’re going to talk a little bit about-, this is a continual theme of the App Marketing Conversation, and then it’s a continual theme in the app marketing news, is just the rising cost of user acquisition. I believe the most recent report was that last month was the highest cost ever, and again we’re not even at Christmas yet, of where our average UA cost of tier one countries is over two dollars. What initial reaction to A, the price and B, the trend that’s always going on?
Robi: I think at this point I’ve stopped being surprised. I’m mostly just interested in a pace, and it seems like it’s pretty healthy growth every time they come out with these numbers. And it seems like more people must be making more money or maybe their chasing it. Like you think their chasing your type methods a little bit before.
Ryan: They might be. To me it’s hard to tell, because I think despite, my view is, despite the backup there has been top line growth of the actual number of users. That doesn’t mean there’s top on growth of the actual number of people who pay a lot. Maybe there’s more noise end users, so you have got to acquire more to find really good ones, maybe.
Ian: Maybe. Whether or not their chasing, my guess is that on the whole they’re probably not, right? There probably is a subset of people that are but the vast majority of these folks are probably doing this with some basis of reality in there right? I think what’s potentially interesting about this is, that at these prices, we are effectively knocking out whole categories of app developers and publishers that can profitably do UA, at least, performance based UA. I don’t see how any advertising driven apps can really manage to sustain these prices. I also don’t see how most brands could afford to do this from a performance base. They could do it from their brand base, but I think, we’re starting to price out a bunch of people, and that’s interesting.
Ryan: That is interesting. One of the things we talked about, and Robi, I know you’re hot on this, the previous segment is e-commerce. How do you think e-commerce companies feel about the rising cost of UA? And when do we see- because right now it’s being driven by mostly games. But I would assume that lifetime value of an e-commerce user is much higher. When do those paths cross and what happens?
Robi: One of the questions I have is, what is it by vertical? I’m not hearing from e-commerce providers that they’re spending tons on UA in the first place. They have other channels to distribute. And when they are, they’re not really complaining about the price. That doesn’t mean that they’re not paying two dollars. I don’t ask them on a regular basis, exactly what their cost is, but I think they’re competing with different people. Part of it’s that, but part of it is they’re already well in the black, a lot of the e-commerce providers are well in the black. They have customers that open up their app and spend $57 on something, like that. So I don’t think they have price sensitivity, either. If they started to generate revenue through the app, they’re like, “Okay, this is a place where consumers are going.”
Ian: The one thing that I would say, I think a lot of those folks, not a lot, some of those folks that I’ve spoken to have expressed concern about is still there is no real intent driven, large scale intent driven channel for them to go through. Travel providers, a lot of e-commerce providers, just basically build their business off of Ad-Sense, I’m sorry, Ad-Words, and knowing that somebody’s searching for white Hanes socks, is really likely to buy white Hanes socks. I don’t think there’s the same magnitude of an intent driven channel on all the apps.
Ryan: Again, maybe go down a different pathway. What do you think about Spotlight Search and its potential to provide on that intent?
Ian: I love Spotlight Search from a theoretical perspective. It’s not clear to me, at all, that Apple cares about it from that perspective. I think it has 10% of that potential, and I think that Google has shown the way there. That, in Android, the search bar is front and center and will go into apps without indexing and will do the web and will do all these nice, everything together. I hope Apple goes that way. I no longer care about organizing my apps. I basically use Spotlight Search as my default navigation. I think that should, probably, be the way it is. We obviously need things like deep linking to get better. I hope that they go that way.
Ryan: Yes, yes, do you have any thoughts about how you’ve used it on Mac? I mean it’s practically the same on iOS. The question for me with Spotlight Search is, do people start to try to identify ways to show up in Spotlight Search, as people use it more? What do you think?
Robi: It’s weird right? I’m the guy on Android. I still don’t navigate my phone through search. I would go pick out apps. I definitely don’t only interact with it that way. Because as you were talking about this, I was trying to think about if I’ve ever gotten dropped into an app and then conducted some commerce through it, and I don’t think that I have. But I’m not interactive with my phone that way. I wonder what the search data tells these guys. I’m going to guess that Apple sees a lot of the intent and knows well enough that they are going to make money off of. They’ve got smart people there. They’ve got a big ads business. I am sort of rambling because I was trying to think of a scenario where it’s worked better on Android than it has on iOS, where it’s de-prioritized, and I just don’t know how much is there versus how much is infinity with existing brands. I do a lot of commerce, with existing brands that I deal with right now, through my apps.
Ian: I’ll give you guys a little sneak preview. We’re running a survey right now to marketers, and one of the questions is, which features of iOS8 do you think are the most likely to propel your business from an organic perspective? And we, basically, talked about the new app stores, the explore categories, all of those things, and one of them was Spotlight Search. Right now that’s actually in the running, for marketers believe that it could actually have the most impact on e-commerce. The study’s not done yet, we’ll see how it actually plays out. It’s still really early on, but it’s interesting that, at least, that’s on people’s minds.
Ryan: We totally dove-tailed a little bit here, but my other question would be, is Spotlight Search on iOS the thing that makes Bing a viable service?
Ian: That is a fascinating thing.
Ryan: That’s a whole topic. Maybe we can do that another time, but powered by Bing, that’s a big deal.
Ian: Yeah, that is.
Ryan: Any final thoughts on User Acquisition costs and what’s going to happen over the next three months? What are we going to talk about the next time we talk about this?
Robi: We’ll be past the holidays, so it will be even more expensive. Most expensive holiday ever, most expensive holiday ever. I think that we are getting a lot more of this. Do your math. Companies should be doing their math and if you’re playing the UA game, just make sure your LTV is up and you’re keeping people.
Ian: I think the headline for me is, as much as I think we live in a mature industry sometimes, from this perspective, just talking about this for five minutes, leads me to believe that we’re really still at day one. There’s a ton of growth happening.
Ryan: Yeah, cool. Okay, thanks very much you guys. Make sure to watch the other segments from Ian and Robi, like this video, subscribe to our channel, and share it with your friends.