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.
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
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
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
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
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
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
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