Can you Survive the Meteoric Rise in App-User Acquisition Cost?

A story broke on TechCrunch today discussing the rise in new-user acquisition costs for Android and iPhone applications based on a recent study. In this study, which covers hundreds of millions of app users, the researchers found that “that the average cost-per-install (of CPI) of mobile apps increased by 70 percent on Android and by 56 percent on iOS”, rising from $0.30 to $0.51 per user on Android, and $0.59 to an alarming $0.92 on iPhone. This means that for iOS developers, monetization of their app at a single $0.99 purchase price means that they will be losing money, which is obviously not a very great outlook for things.

Let’s take a look at some tips of how you can keep these acquisition costs as low as possible.

Start with Building Something Unique and Compelling

Okay, so you’ve got an idea for a “new” app that nobody has done before, or a re-creation of something that exists but you’re going to do it much better. Think about that for a second. Are you? If you can’t sell someone who has had a smartphone for years on the value of your app in under a minute, you might want to stop before you get started.

To stand out in today’s marketplace with countless of apps available, an app has to be nothing short of incredible, or it has to be so unique that no one has ever done it before. Regardless of how quickly the fad died off, the folks behind “Draw Something” saw a meteoric rise in their app’s use simply because they made drawing incredibly addictive and locked their users into a certain usage path that was actually fun.

Make it compelling, or don’t make it at all.

Build Something Worth Sharing

It should go without saying that if you want to keep your cost of new customer acquisition low, you should build something that both has value and is worth sharing around with friends or co-workers. If your core business plan is to build an app that is of little “real” value, you will likely find that your acquisition cost is quite high as you have to continuously sell new customers on the reasons why they should purchase your app.

Yes, in some circumstances – such as Gillette’s famous introduction of the razor blade in beard-heavy Indonesia – it is necessary to mass-educate your prospects on why they need your new product or service. However, if you’re trying to acquire new customers for a $0.99 app and your cost to acquire is $0.79 you are leaving yourself with very little margin. If any at all.

Ask for Referrals, Incentivize if Necessary

It should go without saying that if your users like your app, they will be open to telling people about it. However, you also need to recognize that many individuals don’t think about mentioning it until they are (gently) reminded a few times to tell their friends.

Better yet, if your application allows it, why not encourage sharing via Facebook, Twitter, email, etc. by offering some sort of incentive? It could be a free month of use simply for posting on a FB wall, or unlocking of some special or paid content for tweeting about the app. Whatever it is, ensure that your users are spreading the word throughout their social networks. This is essentially FREE advertising and will certainly keep your cost per acquisition very low.

In conclusion: yes, app developers should be somewhat concerned about the rising cost of acquiring new users as smartphone platforms age and app stores become stuffed full of similar apps that perform similar functions. Know that if you spend the time building a unique app with compelling features that are worth talking about, you will reap the benefits of doing so and your acquisition costs will remain on the lower end of the scale.

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Mobile MarketingCan you Survive the Meteoric Rise in App-User Acquisition Cost?