This year, mobile will account for 70% of all digital advertising in the U.S. and is projected to grow 20% to over $70 billion. With a 34% share of total U.S. ad spend, mobile will pass TV as the leading advertising medium in the world’s largest ad market. That is an incredible 21,775% growth from a short decade ago, when U.S. mobile ad spending totaled just $320 million.
Historically, display ads – which include banner ads and video ads – have been the primary drivers of this shift in digital advertising. However, mobile apps have quickly become a leading ad format and growth engines in their own right. Successful brands have developed a well thought out, robust mobile strategy which integrates apps. If you haven’t considered apps as part of your mobile advertising strategy – it’s not too late to start now.
This is the first of a series of blogs unpacking the mobile web and mobile app advertising industry and how to succeed in acquiring high quality mobile app users.
Myth 1: People aren’t installing apps anymore
Truth: App installs continue to skyrocket year over year. U.S. mobile users downloaded 3 apps per month – at least 70 percent downloaded at least one – with global downloads exceeding 175 billion in 2017, a 60% increase from 2015. Not only are people installing apps, but time spent within these apps is also high. Mobile now represents 65 percent of all digital media time, with mobile apps dominating that usage and app usage per user reached 43 days per year. In most global markets, the average smartphone user has more than 80 apps on their phone and uses close to 40 of them each month.
Apps are also industry agnostic which means your target audience is just about anywhere. Almost every industry is benefitting from mobile apps, including gaming, media, news, retail, real estate, healthcare, education and finance.
Myth 2: Cost per install rates are too high
Truth: Although cost per install rates have slightly increased over the last few years, this doesn’t necessarily mean that cost per install rates are too high. Understanding how users are behaving within your app to validate an average revenue per user metric will allow you to set an appropriate cost per install threshold. Updating the app regularly to optimize conversion rates will allow your company to improve that average revenue per user metric to afford paid acquisition efforts. There are freemium apps within every category that have successfully optimized their app to scale out with paid user acquisition.
Moving forward be sure to focus on post-install events. Instead of focusing on a cost per install metric, start establishing cost per action benchmarks by evaluating how much a user that completes various in-app events is worth to your company. These cost per action goals will allow you to better evaluate paid acquisition efforts in the future.
Myth 3: App revenue cannot become a significant revenue source for a hybrid company
Truth: App revenue exceeded $86 billion in 2017 and grew 105% from 2015 to 2017. To put this into perspective, the app industry drove 70% more revenue than the Worldwide Live and Recorded Music industry, 195% more than the Global Box Office revenue, and 70% more than PC/Console Gaming revenue.
Apps generate revenue from advertising, in-app purchases and paid-for apps. Over the past few years, there's been a trend toward in-app revenue vs download payments, which until 2015 accounted for more than 50% of global app ad revenue. A major reason for this shift toward in-app revenue is the increased sustainability of app advertisement campaigns. With our clients, we've seen much higher success rates with marketing apps that are free to download (monetized through in-app purchases or ads).
Myth 4: Apps can rely purely on organic installs
Truth: There are some apps that can rely on virality and organic installs for growth, but those are extremely rare. A vast majority of the largest app developers have a strong user acquisition strategy. That’s why we see large apps like Game of War, Mobile Strike, Pokemon GO, and Amazon continue to advertise even though they have strong brand recognition. They know there’s incrementality out there and they’ve developed strong paid acquisition strategies to drive profitable growth. Don’t build an app and expect downloads/users. You need a conversion strategy specifically for your app.
Mobile apps are here to stay and will remain a significant revenue generator for businesses that know how to monetize them. Whether apps are new to your digital mix or they’ve long been a part of your strategy, there are opportunities to uncover. Understanding how apps can grow your business is critical – which means knowing the landscape and competitive positioning of your app, finding quality users who convert, engaging and tracking users. With digital advertising constantly shifting there might be a revenue opportunity around the corner you may have overlooked.