Last month, our indexes showed a massive opportunity: January 2016 was the first time in a year and a half that the cost to secure a loyal user decreased, falling 34 percent from December to $2.78. But in February, there was a reversal, as the price to acquire a loyal user went back up 26 percent to $3.50. The reality is that in an increasingly crowded mobile market, sustained app engagement is progressively more difficult. So January’s data represented a notable break for advertisers, particularly following the historically expensive holiday months.
In the meantime, app download volumes decreased slightly during February, falling 3 percent, while Android and iOS CPI declined 4 and 5 percent, respectively.
Taken together, these results paint an interesting picture: Cost per Loyal User (CPLU) increased quite a bit while CPIs actually fell slightly. This indicates that what spending was happening wasn’t capturing loyal users effectively – or that users just weren’t as easy to connect with. As marketers dove in to take advantage of what appeared to be a bargain month, the influx of ad dollars ultimately caused a market correction, driving ineffective installs and ultimately driving prices for loyal users back up.
One challenge in this analysis is that CPLU measures user attention or willingness to engage – a tough factor to quantify. But as others in the space have reported, we are in a mobile engagement crisis, and businesses are not reimagining their mobile experience fast enough. While measuring downloads can be easier and faster, the true metric to worry about is engagement. Driving thousands of installs at a good price is a hollow achievement if few of them stick around to become loyal uses.
Here’s a quick snapshot of our February findings:
- App Store Competitive Index tracks the aggregate volume of downloads per day achieved by the Top 200 ranked free iPhone apps in the U.S. In February, the Index dropped to 8.5 million daily downloads, down 3 percent from January and 12 percent year-over-year.
- Cost per Loyal User Index measures the cost of acquiring a loyal user for brands who proactively market their apps. For the purposes of the Index, loyal users are defined as people who open an app three times or more. This month, the cost per loyal user rose 26 percent to $3.50, from $2.79 in January.
- Cost per Install Index measures the cost per app install directly attributed to advertising. On iOS, CPI dropped 5 percent to $1.78, a 39 percent increase year-over-year. On Android, CPI fell to $2.51, a 4 percent decrease since January and an increase of 66 percent since last year.
While this month’s results are somewhat erratic, the takeaway for marketers is a reliable, consistent one: know your target audience and how to reach them. Those who try to time the market or game the system won’t win in the battle for user attention.
As users spend the vast majority of their time in a small number of apps, continue to focus on capturing the attention and engagement of the ‘right’ users – and don’t chase trends.