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Would a brand spend $20,000 to acquire 10,000 users?

Put yourself in the shoes of a large brand. Does this value make sense?

Would a brand spend $20,000 to acquire 10,000 users? Before you answer that question, spend 5 minutes reading this: 

Some research

The lead indicator of how costly it is to launch an app is, how much it costs to acquire a user. Fortunately, for the App Economy, the metrics are clearly defined, and the Cost Per Install (CPI)
metric is one of the best lead indicators.

I was doing some research on CPIs of native apps today. Here's what I found

  • As of August 2014, CPI on the App Store is $1.04, on Google Play is $0.88.

  • The CPI for iOS has increased 40% year over year.

  • The CPI for Android has decreased 20% over the last year.

Based on the 3 simple data points, here's what we can deduce:

  • More developers are channelling their marketing spend into the iOS app store, because it gives them the most returns (in terms of revenue). Hence, the CPI for iOS has increased tremendously.

  • Less developers are spending marketing dollars on Google Play, hence theres oversupply of inventory.

This makes a lot of sense. Apple's user experience and level of curation trumps Google Play's. A better experience would mean better conversion from non-paying to paying users.

How does this affect brands who wish to launch new products to consumers? For one, expect their marketing budgets to increase, to compete with the 40% increase year over year.

But wait ...

Would a brand spend $10,000 to acquire 10,000 users?

If you're a brand and you said "That's too expensive!", then keep reading....

Brands and marketers are attempting new ways to engage the end user. Within our company, we're seeing an uptick of requests by brands to launch full HTML5 web experiences via the mobile and desktop web browsers. 

Here's a typical scenario, of how brands compare native app to HTML5:

Native app / game

  • Development cost: 10,000 - 20,000 USD
  • Additional cost to acquire 10,000 users at launch: 10,000 USD
  • Optional cost for social media (i.e buying followers, likes, shares): 2500 USD
  • Posting on existing social networks (fan pages) : Free
  • Total minimum budget: Easily 20,000 USD to get at least 10,000 user installs. This value will increase due to rising CPI costs.
  • Platforms covered: iOS and Android (if the app is built using Unity. Most times, clients would say 'lets build separate apps to enhance experience')

With this new info, let's rework our question to the following:

Would a brand spend $20,000 (yes, TWENTY THOUSAND cash) to acquire 10,000 users?

If you're a big brand, this is not an issue. Big brands would splash north of 100,000 USD for native apps, to cover for any possible scenarios (longer development time, more marketing muscle, etc).

What about the rest of us? Let's look at greener pastures: 

HTML5 app / game

  • Development cost: equal or less than 5,000 USD
  • Posting on existing social networks (fan pages) : Free
  • Optional cost for social media (i.e buying followers, likes, shares): 2500 USD. With the brand ingenuity, this can be reduced to zero.
  • Total minimum budget: 5,000 USD
  • Platforms covered: iOS, Android, Windows Phone, Mac, Windows, all at once

Advantages: 

  • Nimble, fast and engaging. 
  • Allows instantaneous engagement, no download walls, etc. Simply click a link and play.
  • Able to collect email, phone numbers, names for further upselling

The advantages of HTML5 far outweights native apps, both on cost and engagement basis. With end consumers having 3-second attention span these days, instantaneous play is crucial. Also, with HTML5, its easy to build additional mechanisms to collect user information for follow-up marketing. With the app stores, Apple and Google own all your user's data.

If you're the brand, what matters to you? HTML5 or Native? 

The end! Thanks for reading. 

PS: I'll be writing a few follow up posts on CPIs, games (advergames), engagement, retention and more. Stay tuned!

Notes:
  • CPIs are not the only indicator. There are deeper, more meaningful indicators, such as Cost Per Loyal User. These are arguably more costly, because it involves a deeper set of actions (i.e opening an app N number of times)
  • I did not take into account the Amazon App Store as a dataset. Will come up with a seperate blog post on this.
  • I founded a company at builds HTML5 experiences for brands (advergames, marketing games, etc). We believe all brands should be able to engage consumers at an affordable cost.

Sources:

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