It’s Not About the Download: Changing the Mobile App Paradigm
For years, I’ve argued that the advertising industry must better embrace mobile, and specifically address the mobile environment and opportunities for advertisers, agencies, and brands. Last week, I spoke at the ARF Maximizing Mobile Creative conference in New York City, where the conversation focused on mobile and its relevancy from a brand perspective. I was thrilled to address this specific agenda, and especially with such a great range of speakers,from major ad platforms like Facebook to research specialists like SSI and YouGov, and from brands to agencies.
An Evolution from Desktop to Mobile
Over the past three decades, we’ve seen the digital device industry evolve from a desktop-centric environment to today’s cross-device standard: while the market for tablets, smart TVs, wearables, and many other device categories continue to grow, mobile devices are growing fastest, with smartphones in particular now adopted by a majority of adult consumers in the U.S.; according to Verto Device Watch, 68% of all adults in the U.S. (ages 18+) own a smartphone, and 52% own a tablet. Brands must take this mobile-centric, mobile-first world into account when it comes to attracting and retaining customers.
Along with the evolution of the device market, consumer content consumption behaviors have also shifted away from web-based portals as apps have emerged as the primary vehicle for people to engage with mobile devices and content. Native apps can be optimized for a delightful user experience, which in turn drives engagement. And engaged users are more likely to be paying customers: the key monetization mechanisms for apps are still in-app purchases and advertising, rather than charging for download (a model that some gaming companies initially employed). Today, more than 50% of all revenues in mobile advertising come from mobile centric-companies, like app and game developers, rather than from the traditional brands.
Stepping Away From the Download
And yet, the mobile industry is still fixated on download metrics as a primary indicator of success. But if an app’s eventual goal is to optimize for engaged and active users, why are we so focused on download numbers?
As seen in recent Verto App Watch data, below (drawn from U.S. adults, ages 18+), there is a significant difference between the number of unique apps installed on the average mobile device versus the number that are actually used. In our analysis, we excluded so-called platform apps (e.g., SMS messaging apps, calendars, phone books, and web browsers) and instead focused on the apps that are typically actively downloaded by the user. We analyzed how many apps are installed on a device at a given moment in time, and how many of them are actually used on a regular basis.
Verto Analytics data shows that on average, consumers in the U.S. have 71 unique apps installed on their mobile device at any given moment. However, only 25 unique apps are used on a monthly basis; 18 unique apps are used on a weekly basis, and on an average day, only 7 apps are being used by the average consumer. This not only underscores the importance of getting your app into that elite group of apps that are actively used on a regular basis, but it also indicates that download numbers have little or no correlation to an app’s likelihood of being used regularly.
A New Framework for Measuring App Adoption
Simply put, while downloads do result in a certain installed base of apps on a device, that does not necessarily correlate with actual usage. This is one big reason why Verto Analytics measures the app economy by focusing on usage-related metrics, such as the Verto stickiness index, user time spent, frequency (sessions), retention, churn, average session lengths, and so on. Throughout the course of our work, we’ve discovered that what matters most to our clients is the following framework, which we built to better understand mobile app and mobile games adoption.
Mobile app and game publishers reach a certain segment of the consumer population via ads and other forms of marketing, including SEO/SEM and discoverability within app stores. However, only some of the consumers who are exposed to this marketing actually end up downloading the app or game property, and an even smaller subset of these consumers will actually use an app or game; a mere download isn’t a guaranteed engagement, since some of these consumers never even open up the game or app. While the ones who do so at least once have a certain likelihood of returning the next day, only about 5-20% (for typical downloadable apps) are still using the app after a month. This funnel, which we call our mobile app retention model, explains why only a small proportion of downloads lead to loyal active users.
Why does the funnel matter? Our framework enables app companies and brands to measure their retention numbers. And through Verto’s App Watch service, we can also measure the conversion of downloads to monetizable users. App developers and mobile game publishers influence and drive the retention of their apps and games through gameplay dynamics, user experience, mobile audience acquisition tactics, media plans, configuration of programmatic advertising, and choice of geographic market. Our framework makes it possible to analyze the success of each of these individual factors and identify which ones affect retention:
- App or game category
- Intensity of competition
- Consumer interests and needs
- Time of the day for the download
- Day of the week for the download
- Device model and characteristics (e.g. screen size)
- Operating systems
- Device type (smartphones vs. tablets)
- Geographical market
- Demographics of the consumer
- Location and place of the download
- Social influence or pressure, etc.
Moving further down the funnel, we reach an even smaller base of users: those active and loyal consumers who continue to use an app or game 30 days after the download. This comprises only 0.5%-2% of all consumers who originally downloaded the property, and this is the user base that will, in practice, drive your monetization strategy. It does not matter if your monetization strategy focuses on in-app purchases (as practiced by many free-to-play games, some of which have turnovers in the billions of dollars per year), advertising (e.g. Spotify’s free app), or m-commerce (e.g. Starbucks or eBay). The fact that you have lots of loyal users helps you make more money. In fact, a loyal, engaged, and happy user base indirectly leads to new downloads through viral effects, and e.g. high app store rankings and reviews. As many as 63% of all app downloads still happen via app store discovery (app search, featured app lists, etc.).
Optimizing for a Loyal And Active User Base
Brands, app companies, and ad platforms need to figure out how to maximize the ROI for a given budget, and identify and optimize for this loyal and active user base. The framework we built above will helps assess and measure this user base, as well as providing a guideline for benchmarking performance against peers in the same industry.
When it comes to looking beyond sheer download numbers, mobile adtech platforms and app publishers must consider three important key takeaways
- Mobile app install advertising drives more than 50% of the mobile advertising market.
- The industry needs a new framework for measuring mobile app advertising ROI, based on measuring the conversion from installs to long-term user activity.
- Only about 0.5-2.0% of all downloads lead to long-term monetizable users – optimize for this audience segment..