Five common mistakes made in marketing freemium apps
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The document summarizes five common mistakes made in marketing freemium mobile apps: 1) misunderstanding lifetime customer value (LTV), treating it as linear or immediate rather than a future cash flow; 2) misunderstanding platform featuring, seeing it as guaranteed rather than optional; 3) misunderstanding mobile ad networks, not recognizing their costs and limited inventory; 4) misunderstanding cost per install (CPI), treating it as constant rather than dependent on multiple factors; and 5) misunderstanding chart dynamics, seeing top app placement as substituting for quality rather than potentially offsetting acquisition costs if LTV is high enough.
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Five common mistakes made in marketing freemium apps
- 1. Five common mistakes made in marketing freemium apps Eric Benjamin Seufert Israel Mobile Summit June 10, 2014
- 2. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 3. How is Freemium different?
- 4. How is Freemium different? What is freemium?
- 5. How is Freemium different? What is freemium? • 0 marginal cost of distribution
- 6. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate
- 7. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market
- 8. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market • Continuous monetization curve
- 9. How is Freemium different? What is freemium? • 0 marginal cost of distribution • Low inherent conversion rate • Large scale / large total addressable market • Continuous monetization curve • Minority of highly engaged users
- 10. How is Freemium different? How do freemium mobile products differ from paid mobile products?
- 11. How is Freemium different? • No switching cost How do freemium mobile products differ from paid mobile products?
- 12. How is Freemium different? • No switching cost • LTV difficult to calculate How do freemium mobile products differ from paid mobile products?
- 13. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) How do freemium mobile products differ from paid mobile products?
- 14. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve How do freemium mobile products differ from paid mobile products?
- 15. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve • Advertising not as abrasive How do freemium mobile products differ from paid mobile products?
- 16. How is Freemium different? • No switching cost • LTV difficult to calculate • Much larger potential audience (everyone can afford free) • Network effects easier to achieve • Advertising not as abrasive • Multiple points of monetization How do freemium mobile products differ from paid mobile products?
- 17. How are Games different? How do mobile games differ from non-game consumer mobile products?
- 18. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case
- 19. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation
- 20. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set”
- 21. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch
- 22. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning
- 23. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes”
- 24. How are Games different? How do mobile games differ from non-game consumer mobile products? • Not action-driven / different use case • Demographic bifurcation • “Content” is different than “feature set” • Longer development lead-times before launch • No “network moats” / more susceptible to cloning • Well-defined, perennial “archetypes” • Long history for comparison
- 25. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 26. Misunderstanding LTV What is Lifetime Customer Value (LTV)?
- 27. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user
- 28. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay
- 29. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay • Can be aggregated over various dimensions (demographic characteristics / early user behavior)
- 30. Misunderstanding LTV What is Lifetime Customer Value (LTV)? • Present value of future cash flows from user • What individual user can be expected to pay • Can be aggregated over various dimensions (demographic characteristics / early user behavior) • Marketing metric
- 31. Misunderstanding LTV What is Lifetime Customer Value NOT?
- 32. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
- 33. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
- 34. Misunderstanding LTV What is Lifetime Customer Value NOT? Linear*. *usually. An LTV evolution curve could theoretically be linear.
- 35. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate.
- 36. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV =
- 37. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0
- 38. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0 Day 180 Recoup $LTV
- 39. Misunderstanding LTV What is Lifetime Customer Value NOT? Immediate. 180-day LTV = Pay $CPI Day 0 Day 180 Recoup $LTV (More on this topic: http://bit.ly/2MLTV)
- 40. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition.
- 41. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition. Marketing Profit = LTV - CPI
- 42. Misunderstanding LTV What is Lifetime Customer Value NOT? Upper limit that can be spent on per-user acquisition. Marketing Profit = LTV – CPI Operating Profit = LTV – CPI – Everything Else
- 43. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 44. Misunderstanding Featuring What is Platform Featuring?
- 45. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app
- 46. Misunderstanding Featuring What is Platform Featuring? • Free publicity given by a platform to a specific app • A source of free installs for said apps
- 47. Misunderstanding Featuring What is Platform Featuring NOT? Charity.
- 48. Misunderstanding Featuring What is Platform Featuring NOT? A winning lottery ticket.
- 49. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
- 50. Misunderstanding Featuring What is Platform Featuring NOT? Guaranteed.
- 51. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 52. Misunderstanding Ad Networks What is a Mobile Ad Network?
- 53. Misunderstanding Ad Networks What is a Mobile Ad Network? • An intermediary between publishers and advertisers
- 54. Misunderstanding Ad Networks What is a Mobile Ad Network? • An intermediary between publishers and advertisers • A technology platform that facilitates the sale of ad impressions
- 55. Misunderstanding Ad Networks What is a Mobile Ad Network NOT?
- 56. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Frictionless / cost free.
- 57. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
- 58. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory.
- 59. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. Installs Purchased
- 60. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? A source of infinite inventory. CPI Installs Purchased
- 61. Misunderstanding Ad Networks What is a Mobile Ad Network NOT? Accessing inventory that no other network is accessing (necessarily).
- 62. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 63. Misunderstanding CPI What is Cost Per Install? • The average price paid for a mobile app install
- 64. Misunderstanding CPI What is Cost Per Install NOT? A price that is set by an ad network.
- 65. Misunderstanding CPI CPI = / CTR / IRCPM 1000
- 66. Misunderstanding CPI CPI = Market-based / CTR / IRCPM 1000
- 67. Misunderstanding CPI CPI = Product / Creative dependent CPM 1000 / CTR / IR Market-based
- 68. Misunderstanding CPI What is Cost Per Install NOT? Constant over time.
- 69. Misunderstanding CPI What is Cost Per Install NOT? An indicator of “quality” / how much user will spend.
- 70. Structure How is Freemium different?How are Mobile Games different? Mistake 1: Misunderstanding LTV Mistake 2: Misunderstanding featuring Mistake 3: Misunderstanding ad networks Mistake 4: Misunderstanding CPI Mistake 5: Misunderstanding chart dynamics
- 71. What are Chart Dynamics? Misunderstanding Chart Dynamics
- 72. What are Chart Dynamics? • The interplay between chart position (top downloaded / top grossing) and app visibility Misunderstanding Chart Dynamics
- 73. What are Chart Dynamics? • The interplay between chart position (top downloaded / top grossing) and app visibility • The ability for an app developer to offset per-user marketing losses with additional “organic” installs Misunderstanding Chart Dynamics
- 74. What are Chart Dynamics NOT? The same for every app. Misunderstanding Chart Dynamics
- 75. What are Chart Dynamics NOT? A substitute for a quality product. Misunderstanding Chart Dynamics
- 76. What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Misunderstanding Chart Dynamics
- 77. What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart ) Misunderstanding Chart Dynamics
- 78. Misunderstanding Chart Dynamics What are Chart Dynamics NOT? A substitute for a quality product. In a chart push… Profit = Marketing Cost – ( LTVacquired * UsersAcquired + LTVorganic * UsersChart ) If LTVs are low, may be impossible to get enough users from chart position to offset marketing cost.
- 79. What are Chart Dynamics NOT? Sustainable at a constant CPI. Misunderstanding Chart Dynamics
- 80. Freemium Economics Mobile Dev Memo http://FreemiumEconomics.com http://MobileDevMemo.com
- 81. Questions?
Editor's Notes
- Diversification key to keeping overall prices low
- Means per-network LTV may not really indicate anything / be left completely to chance on a given day Some networks do access inventory exclusively
- Means per-network LTV may not really indicate anything / be left completely to chance on a given day Some networks do access inventory exclusively
- Whats the interplay between scale, user acquisition, and profit? Cost Per Install
- Pure function of supply and demand
- Dependent on ad creatives used to promote the game
- The most likely users to download your app do so the first time they see an ad Reaching subsequent users takes multiple ad viewings, which increases the price paid on CPM Reaching users after that may require refreshing creatives
- This is dependent on the game High CPI might correlate with better-targeted ads / more engaging ad formats / countries with higher average per-user spend, but that doesn’t guarantee anything with respect to individual behavior
- Being number 1 in one week doesn’t necessarily guarantee the same number of installs as #1 the week before it. Likewise, some weeks are more competitive than others and reqiure higher install #s to reach top 10
- If LTV is low, no amount of “free” app installs may be able to offset cost of marketing
- CPI will increase dramatically while spending at a loss because most suitable users are being acquired quickly Rate of change of CPI is faster when large quantities of users need to be acquired