Key Metrics for App Monetization, App Retention and User Acquisition

Here are the key metrics any app manager for apps in particular for freemium apps should look at:
Please let me know in case I have forgotten some important metrics

Customer Acquisition

• CPI = Cost per install  
• CTR = Click through rates. Can vary from 0.1% to 15% depending on the invasive character of the ad 
• Conversion rates 
• Click to install 
• Install to active user 
• active user to paid 

• CAC Customer acquisition costs = sum of direct marketing expenses of all channels 
• Weighted CAC = In case you are boosting a game from zero to the top charts, you might want to factor in the zero CAC through organic installs.

The mobile gaming space has turned from a blue to a dark red ocean where publishers with big pockets are outspending competitors. In general the best monetizing games will justify a CPI of 70 cents. Not more. General rule of thumb: Don't spend more than 30 cents depending on the marketing channel. Users coming from an offer like Tapjoy usually will have a lousy monetization with unofficial deinstallation rates of ~80%

Retention 

• DAU = daily active users 
• Retention (7days, 30 days) = Logins in a time interval and time usage thereof

Most mobile games level off after a couple months. Look at appannie data and you will be astonished. Mobile social games like Rule the Sky can have a life time of 18months. But this is largely due to 2 updates per month keeping users busy. Big hits like Anipang in the casual space seem to last at least 6months.

Monetization

• ARPU = average revenue per user per month
• ARPPU = average revenue per paying user per month
• ARPDAU = average revenue per daily active user
• % paying users (to cumulative users) 
• ARPDAU / DAU = ratio between average revenues per daily active user and daily active users
• Life Time (Free and Paid) --> LTV Life Time Value
• Time from free to paid user t{free --> paid}
• eCPM = (revenues / total ad impressions) x 1000  --> In case you are in-app ads driven

 What I noticed are definitely some cultural differences as to how steep the balancing between free and pay can go. In Germany, users can turn the best made game launch into a total shitstorm because game balancing quite frankly started to suck after 1h of game play, forcing users to pay more than they would have ever paid for a premium game.

Profitability (Contribution margin 1) metrics

• DAU x ARPDAU > Costs (--> Target margin)
• LTV - CAC = Profit 
• (LTV - CAC) / LTV = ROI 
• NPV {LTV} Net present value of LTV --> would only make sense if you had a very long LT over two years, so that you would have to discount the cash flows. 

In case you are not having enough budget or inherent virality with the game that the average CAC per user becomes less than the total LTV, you need to control ROI right from start, especially when you have run some initial tests and now want to grow. So when you are able to boost yourself up to the top 10, a direct contribution margin might be lousy but offset by the free installations you get from organic store users.

 If you have more feedback, please add me on my David An Gplus account


Update note: 18March2014
I have found a good article called " Monetization-based Game Design: ARPDAU Contribution" 
http://quarterview.com/?p=228 with a good benchmark data

App Marketing Best Practices

I cannot think of any market in the internet economy that has the same degree of competitiveness than the app economy - in particular the mobile gaming space.

As I previously stated, the top 10 apps make of more than 44% app usage, half of revenues on iOS and Android go to 25 top publishers. This is equivalent to about 0.008% of app developers.

So I thought we need a little bit of best practice for app developers as to how they can successfully grow their user base:


Paid App Promotions 

1. In-App Cross Promotion (using platforms like Chartboost, Applifier)
2. In-App Advertisement (Admob, Inmobi)
3. Incentivized Downloads (Tapjoy, Sponsorpay, Supersonicads)
4. Special Deal Apps (FAAD, App gratis)
5. Mobile Banner Campaigns (Adwords)
6. Facebook Marketing (Buying fans or installations)
7. Influencer Marketing

Public Relations 

1. Special Interest app online magazines (Playandroid Magazine, Fettspielen Magazine)
2. Online news magazines (like heise.de, or Golem.de
3. Tech bloggers  (Techcrunch, Gigaom, Mashable)

Social Media 

1. Twitter (especially working with promo codes)
2. Weibo (leading chinese site)
3. G-Plus (likely that it affects Google rankings)
4. YouTube (Video trailer)

  App Store Marketing 

1. Carrier Stores (there are 5-7 in China, 3 Stores in Korea with T-Store, Olleh, LG Uplus) 
2. Portals (Opera, Getjar, Dolphin, Playandroid.com, Androidpit)
3. OEM Stores (Samsung Apps)
4. App Store Marketing Aggregators (there are companies who will do everything for you)

App Store SEO

1. Downloads
2. Number of reviews (stars) 
3. Comments 
4. Description, Name , Screenshots, Keywords

Social Graph Viral

1. Messengers (like Kakao Talk, Line, Whatsapp APÌ)
2. Social Networks (Facebook API, QQ)

Friends at Google and Apple 

1. Can you bring you up to 50-60k per day per country per category 
2. Only works if you have a top quality game

Channelling 

1. Find app or website publishers who are willing to advertise your app for a revshare deal
2. TinyCo has built the first internal program 
3. Mobile-PS, a mobile game publishing solution and platform (not launched yet)

But most important: Have a great game that the world has not seen before!

Please comment below if you have further suggestions!

App Retention follows App discovery

In my book Revenue Model Optimization of Android Gaming Apps: Or how to make money with Android I elaborated quite a lot on the "mobile app discovery problem".

Distribution of apps has become the holy grail for app developers. I argued that there are over 400 thousand apps each on Android and iOS battling to be found by users.  And competition is fierce because of the physical limitations of the Appstore where users primarily go to in order to search for, find and install games.

The war for app discovery seems to have become even more fierce since strong intermediaries like Kakaotalk or Line in Japan have started to take the role as a meta-distributor of mobile (often social) games. As Playandroid Magazine shows in its article of Everybody’s Game – 모두의 게임 for Kakao. Meta Platform Kakao has catapulted this game to 5.5 Million downloads in 14 days and 20% of my Kakao buddies have started playing it too. This means game app usage is currently concentrating an even less number of apps then before.

A September 2011 study by Nielsen found that 44% of time usage are covered by the Top 10 apps. I inferred or guessed from these statistics that the correlation between those ten apps being used and being found in the app store ranking is almost ~98%.

But when I discovered the "folder/icon arrangement" function on Android (introduced since 4.0) I realized that this figure must by slightly lower. See the following screenshot from the my Google Nexus:

What I did was arrange my favorite apps in logical clusters and discovered that these categories have actually not really changed a lot in the course of internet history. Those are:

1. Messaging Services (Skype, Kakao, Whats app, Google Talk)
2. Social Networks (Facebook,
3. eBooks and Comics 
4. Games (Anipang, Tower Defense games)
5. News (BBC, N-tv, Spiegel, YTN, Mashable)
6. Photos (Instagram, Kakaostory)
7. Videos and Movies (Youtube)
8. Utilities (Security, weather apps)
9. Music (Google Music)
10. The most important app: the Bible (and some creeds and catechisms)

Looking at the screen reminded my very much like the physical limitation of apps in appstores where users find new apps. However:

• Some apps within a category are simply category leaders. Therefore, the battle had already being won on some other battleground where a "winner-takes-it-all" victor claims its space on the smartphone screen.
• All apps that remain there, are super quality apps. Previously, I had de-installed the Facebook app due to its crappy performance, which has gotten slightly better recently. So crappy apps even if they are category leaders do not remain on the screen unless they dramatically improve.
• Some apps are special interest/ niche apps like the Bible which unfortunately is being read by a minority these days. For instance the ESV Study Bible is a top app within the niche category of Bible apps.
• Almost all of the apps that remain on my screen constantly provide me value through fresh content updates.This increases longterm loyalty.

Conclusion

You either are a category leader having won a war and claiming victory on the smartphone screen. Or your app is fulfilling the "niche" category need of a smartphone user. All my findings might not come to you as a big surprise. But I think what we will and must see in 2013 and onwards is a shift from the madness of gaining sheer size in installation figures at 1-2$ CPI levels towards a retention-driven persuasion of apps for space on the smartphone screen. Of course, you need to be found, but focusing on retention is a much more sustainable way to profitably grow in this business.

Impressions and thoughts from G-Star 2012

Just like Gamescom in Germany or Tokyo Game Show in Japan, G-Star is Koreas most important gaming industry event held in beautiful Busan and its newly built Bexco B2B hall.
Mobile Gaming is definitely on fire with the Korean smartphone gaming market ending up at 700 million US$, growing to 1.1 billion US$ next year as shown below.

Games like Dragon Flight distributed via instant messenger app Kakaotalk are making 2 million US$ each day, only through in-app-purchase transactions. Though the game play is nothing new, the game balancing is quite sophisticated and the smart integration with the Kakao Game Center API brought unspoken viral distribution among the 40 Million user base. Kakaotalk is at the same time the hottest Korean venture around with former NHN founders in the management board. 

Russian online gaming company Wargaming is growing dynamically too. Below is a picture of their party at the prestigious Busan Elune Night Club. I forgot the name of the girl group to be honest but it was quite a nice act.

What worries me though is the level of marketing spent per user = customer acquisition costs. Some companies with big marketing budgets are spending globally on a 2 US$ CPI level. Assuming a high conversion rate of 5% from free to paid users and aiming at a modest 30% target margin which would have to finance all other costs after "value creation", each paid users` life time value would have to be at a ~ 55$ which is more than unachievable.

Why are the new gorillas like Zynga, Gree and DeNA investing at that rate:

1. They need to show a growing number of users to Wallstreet. Usually, financial analysts do not have the insight into smart mobile marketing user acquisition strategies.
2. Its a bet or kind of call option that hopes that other games can be sold to their internal addressable market. Therefore the calculation above might work out if you factor in some "value at gain" in the future. 
3. Simply outspending competition and pushing them out of the market 

And they are not only buying users through marketing but through acquisitions too. For instance the Pokelabo acquisition by Gree was at at P/E Ratio of 25. Zynga bought an OMGPOP user at 6$. As we know the latter was an acquisition that definitely destroyed shareholder value.

On interesting company I heard of is AppDisco which pay you the more you achieve within a game - yes you heard right, pay you in cash. This reminds me of a similar company back in the old dotcom days which would pay you for clicking on banners. Indeed, this was way prior to Google clickfraud era.

Personally, I cannot find anything sustainable in this model and in spite of their massive growth, the oracle delphi tells me that they will not prevail.

Companies like Com2us or Gamevil, each posting about 20 million US$ per quarter seem to enjoy some sort of winner-take-it-all wave in the Korean market. In order to build the next Nintendo, they will have to

1. internationalize globally and not only in USA, China, Japan.
2. prepare for the next convergence trend where consumers will demand for a cross-platform experience. Not for every game, but it can become a significant future driver.

With regard to marketing innovation in the mobile space there will be a trend next year going into the direction of customer-life-time-value where game publishers do not outspend competition in costly price wars but rather foster their own eco-systems of channel partners.

The holy grail will remain viral of course, but as there are over 600 games in the Kakaopipeline currently, and viral features will be increasingly switched off by users, the level of exploding games like Anipang and Dragonflight will be distributed amony many more games.