According to app marketing technology company Fiksu, the cost of app marketing reached new heights this summer and it's likely to keep climbing. How should marketers deal with these rising costs?
The cost of app marketing is at an all-time high, according to app marketing technology company Fiksu.
Boston-based Fiksu has been analyzing trends in app marketing for the last four years and in June of this year, the Cost Per Loyal User Index (CPLUI) - which measures how much money brands spend to acquire regular users of their iOS apps - peaked at $2.23. According to Fiksu, a regular user is someone who uses the app at least three times.
The data suggests there's a correlation between the cost of marketing and the App Store Competitive Index, which tracks the aggregate volume of downloads for the 200 most popular free iPhone apps. The more people that download the app, the higher its rank in the App Store. This gives the app more visibility and more downloads, which in turn results in a lower marketing cost.
The numbers tend to be cyclical, with downloads typically increasing with anticipated product launches and during the holidays, and decreasing during the summer.
This summer, however, the number of downloads was even lower than usual: 6.1 million in June, versus 6.6 million in May. June also marked the first time the CPLUI was higher than $2, a 25 increase from May and a 49 percent increase from last year. Craig Palli, chief strategy officer at Fiksu, attributed that to the popularity of the World Cup and Apple's temporary ban on apps with incentivized video advertising.
Palli believes the costs will go back down in the coming months, but only for a short while.
"The cost of a loyal user is increasing because mobile is such an incredible value compared to every other form of marketing," he says.
Indeed mobile marketing is a fraction of the cost of other forms of digital marketing, which itself is infinitely cheaper than traditional strategies, such as newspaper, television, and billboard advertisements.
Like the CPLUI, the Cost Per Install Index (CPII) is also steadily increasing. Apple's CPII, which measures the cost per app install that's directly attributed to advertising, dropped from $1.11 in May to $0.98 in June. Though that number is back below a dollar, it's still a 21 percent increase from $0.85 last year.
Echoing Palli's sentiments, Joe Laszlo, senior director of the Interactive Advertising Bureau's Mobile Marketing Center of Excellence, adds that the sheer number of apps is another factor in the rising cost to market them.
As of June, 1.2 million apps were available in Apple's App Store, which is visited roughly 300 million times each week.
"It's getting harder and harder to stand out from the crowd. Even if you're a major brand with a loyal following, it can be a challenge to convince users to add your app to their already-crowded phone screens," Laszlo says. "It's not enough to build an app, launch it in the app store, and hope the world beats a path to your door."
While apps have traditionally been seen as powerful branding tools, now more brands are seeing them as moneymakers. Though all but five of the top 100 grossing apps in Apple's App Store are free, mobile app revenue was at $38 billion last year, a number projected to increase to $92 billion by 2018.
"People are jumping into this boat really quickly," Palli says. "You've got industry leaders like Coca-Cola utilizing mobile and doing a great job with it. Now I think the rest of the market is looking to catch up and accelerate their use of mobile, and they're getting a tremendous benefit."
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Before joining the ClickZ team, Mike O'Brien was a reporter for newspapers in Brooklyn and Eugene, Oregon, where he earned a Master's degree in journalism from the University of Oregon. Having also worked in newspaper sales, Mike enjoys writing about marketing and advertising much more than selling it.
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