How Mobile Games Can Adapt to Rising User Acquisition Costs (apptentive.com)

Cost per installs (CPIs) for mobile apps hit an all time high during 2013 and all signs point to a continued cost increase each year. Unfortunately, the average revenue per user (ARPU) is not increasing at the same rate or even close to it. To understand what these numbers mean for app publishers here’s some quick math, adopted from Superdata, to depict what it means to have CPIs increase.

“Let’s say that you’ve just acquired a cohort of 100 brand new users at an average CPI of $2.25 USD. The average conversion rate (from a non-spending to a spending user) in October was 4.68 percent,” the company said. “Each of these players spends $21.45 (average revenue per paying user for mobile in the US). That gives you $100.39 in monthly earnings. With $225 in cost, you’ll need to make sure you keep those users engaged for at least two months before you start making a profit. And two months is an eon in mobile game time.”

If two months is an eon in mobile game time then the opportunity for mobile games to make a profit looks grim for the future. As  acquisition costs continue to rise year after year, customers will need to be engaged longer for the game to have a chance at making a profit. For mobile games (and other apps) there is only one conclusion:

Developers need to start to find a balance between paid acquisitions, and “earned” or “owned” organic acquisition.  Don’t simply dedicated your entire marketing or acquisition budget to paid ads or installs, but rather seek out ways to foster organic consumer behavior that will lead to referrals and fan media activity.

The goal of any customer acquisition campaign is not to simply acquire new customers, but acquire customers that actually spend money.  In an article from VentureBeat, Erlend Christofferson from Supercell and Jussi Laakkonen from Applifier both agreed that the ideal method of customer acquisition isn’t paid, but through word-of-mouth, customer engagement and community development.

We focus on creating engaged users. We believe an engaged user is more likely to tell his friends about our games, and more likely to monetize. - Erlend Christofferson, Supercell

The new way for games coverage, like everyone says, is a friend showing another friend a game. “Hey, you have to play this.” That’s the best way for a consumer to find a game. - Jussi Laakkonen, Applifier

Recently, I had the chance to talk with with Jon Kimmich, the founder and CEO of Software Illumaniti. We spoke about the rising costs of acquisition for mobile games and why it is critical for mobile game developers to employ other methods in lieu of paid acquisition. He had this to say:

Mitch Lasky (of Benchmark Capital) really hit the nail on the head when he said, ‘Developers will need to consider offering a high-quality community experience within their games.  At their best, games are single-purpose social networks’.  It’s one thing to build moment-to-moment gameplay engagement, but the most engaged and committed fans don’t stop there, they create commentary and content that extends and (in some cases) transcends the game or app experience, and as a developer you need to both nurture and provide means of expression in support of this activity.  To fail to do so is tantamount to leaving engagement (and money) “on the table.”

Even though paid acquisition seems like a necessary evil to compete with other mobile apps, taking steps to increase your organic downloads can be more valuable.

Facebook’s app advertising is often heralded as the best channel for paid  acquisition. In a recent report from Localytics, installs from Facebook hold a slight edge over organic installs in the total number of times an app is used over the first 60 days. However, that slight edge ends after the 4th use. Organic installs result in a higher percentage of 6+ uses over 60 days.

As described by Christofferson, highly engaged customers are the most likely to monetize and tell their friends. Based off the chart, organic downloads tend to bring in more highly engaged customers over time than Facebook.

So instead of increasing your budget for paid installs, it makes more sense to focus on your organic installs.

1. Community Influencers

Take advantage of the influencers in your niche. According to the Ayzenberg Group, the most powerful form of digital marketing today is based on how we seek out information in the digital world. We look to the online experts who share our interests and heed their advice over any other form of marketing and corporate advertising.

Spend time finding and connecting with the online bloggers, social media stars, YouTube contributors, and other digital experts who fit your niche. Develop relationships with them and run campaigns utilizing their networks. These “new influencers” are proving extremely effective and yielding better results than previous online marketing tactics.

2. Interact With Your Customers

Turn your mobile app into a conversation platform and learn what drives your mobile customers to leave or return to your app. You can incorporate in-app communication tools to help provide in-app support, receive feedback, and interact with customers.

Creating a place where customers feel heard and listened to as part of the app experience increases customer engagement. Customers trust problems will get solved and feel better supported when they can talk directly to someone. The positive customer experiences that stem from the support, feedback, or other conversations you have with customers go a long way to powering those positive word-of-mouth exchanges that every app covets..

Lastly, providing one final frontier to capture information about bugs instead of learning about them on the app store is very meaningful. Negative reviews are powerful deterrents for new downloads. Having customers come talk to you directly instead of the app store decreases the likelihood of receiving low reviews.

Customer Acquisition Strategies for Mobile Games

Building a great game is by far and away the most critical component of having a successful mobile app, but in crowded app stores even great games need help to be noticed. Cultivating communities in-app and online are powerful acquisition methods that are more sustainable, relatively inexpensive, and gain customers with a higher lifetime value than paid channels.

As you plan your acquisition strategy or look to tweak the one you already have, don’t ignore your app customers and fans in your niche online. It will take a little more time and effort than just paid advertising, but it will have the greater reward.

If you have any suggestions of other methods of customer acquisition that can help mobile game developers combat rising acquisition costs please share below in the comments.