How Developers Can Overcome the Short App Life Cycle
November 5, 2015 | Contributed by: Claudia Dreier-Poepperl
It is a scene played out on every smartphone and tablet. A user downloads an app and uses it frequently for a month or two before shifting attention elsewhere. For app developers this presents two interrelated issues around the app life cycle; cost per acquisition and on-going user engagement. Its absolutely crucial to hit the right balance between the two – with a lower cost-per-acquisition and a more long lived on-going user engagement, the higher the revenue that is generated.
The good news for developers is that apps are receiving a lot more attention. Nielsen figures for example, suggest that between 2011 and 2013 the typical mobile and tablet user went from spending nearly 18 and a half hours on the 23 apps they had downloaded to spending nearly double that time, just over 30 hours, on 26 apps.
Yet although time spent on apps continues to increase, demand for new apps hasn’t kept up. Last summer Deloitte found the average smartphone user was downloading 1.82 apps per month compared to 2.32 the year before. It also found nearly one in three respondents (31%) had never downloaded an app, up from one in five the year before, and a staggering 90% had never paid for an app.
The attention is there but it’s concentrated on fewer apps.
With the right marketing strategy and budget in place, developers can achieve an early flurry of downloads. But monetization (revenue) only really begins when the app is in use. There are four main options; paid, freemium, in-app advertising and paidmium.
App analytics firm, App Annie’s most recent research (March 2015), found that the most popular monetization route was freemium. In fact, an overwhelming 70% of developers are primarily seeking to fund app businesses through the freemium model, while nearly half are looking at in-app advertising.
In terms of returns, in-app advertising and freemium revenues show the greatest health, leaping 71% and 72% in 2014 compared to the year before.
Conversely, revenue from paid apps has seen a decline of 19% and shows no sign of improving with the paidmium model showing the biggest decline in revenue, down 24%, over the same period.
Unsurprising, then, that in-app advertising and freemium (supported by in-app purchases) are the two main options developers are pursuing. It follows that on-going user engagement is absolutely critical – no usage, no revenue.
Yet, in all but a handful of cases, usage will drop to such extent that it joins the ranks of ‘zombie’ apps, which remain unused and ready for deletion next time the user needs to free-up memory on the device itself.
Mobile analytics firm, Flurry, conceptualizes the decline as the ‘half-life’ of the app as it goes from peak usage to unused and awaiting deletion. The research suggests that half of all apps will be used half as much three months after they hit peak usage. This decline continues steadily until ten months after hitting a peak, where the average app has less than a quarter of the use it once enjoyed.
More than ever app owners and developers need to focus on app re-engagement. The standard approach is to drive that re-engagement through more mobile marketing techniques – usually increased ad-spend and push notifications – which of course both extend and increase the cost and acquisition process of any given user.
Mobile marketing firm Fiksu has a useful index that measures the cost per loyal user (for the initial period of engagement) – the price of acquiring a user who opens an app at least three times. The bad news is that this cost is rising. Last year the cost-per-loyal-user index increased 21% to $2.25 in September, from $1.86 in August.
In other words, there is increasing activity and growing competition to capture the attention of customers.
Its clear that developers and app owners need to consider alternative models for driving revenue throughout the life cycle of an app’s use. A relatively new approach uses one of the primary functions of any smartphone – voice calls – to trigger a Post Call Ad Unit that displays ads on the smartphone screen at the end of a phone call.
Because the service is embedded in an app by the developer in the build, any impression that is generated is associated with that app – whether that’s a game, a utility app or a messaging app.
According to the GSMA, we make an average of 150 voice calls per month. When multiplied across an entire app installed user-base, that’s a significant amount of impressions and builds a much needed incremental revenue stream – whether the app is in use or not.