updated icon May 26 2016

In today’s saturated marketplace, releasing an app is only half the battle. Acquiring users and keeping them engaged is the ultimate victory and, with the app economy’s competitiveness, optimizing your app’s UA funnel is as important as ever.

Besides your cash-flow situation on the bank account, there are quite a few other parameters to take into account when trying to determine your optimum mobile spend for user acquisition. Through this post we try to outline the key factors.

1. Track the Right User

Everything starts with collecting and analyzing the right user data. You want to identify your best users and focus on acquiring more of the same. So in your analysis, look for the segment of users that offers the highest LTV and then extract the correlations between their profiles in order to model your ideal target.

2. Get Traffic from the Right Sources

Once you have established your ideal targets, you have to figure out where to find them.

Through third-party attribution, you can track the sources that deliver you the highest numbers of installs as well as where these installs are coming from. By combining third-party attribution with the powers of post-install data visualization tools, you can then segment user cohorts based on multiple parameters such as date, traffic source, geography as well as retention rates and highest payers. Focus on the sources (paid or earned) that bring you high-quality users based on that post-install activity.

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That being said, never put all your eggs in one basket. Mobile is a fast-moving ecosystem and all marketers are dealing with moving targets. Make sure to always have a consistent mix of traffic sources, allowing you to be more agile when the market shifts again (and again).

3. Show the Right Ad Units

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First and foremost, A/B test your ad creatives to eliminate the ad units that do not convert well. Then, you must also prioritize your UA budget by focusing on the User Experience. Banner ads may be more native for users, but do they deliver the high LTV users? Would video ads ensure better results?

While the ad units giving you more users may have a higher CPI, if they guarantee a high delivery of LTV users then your money is well-allocated. Remember, every ad unit has its perk and price. You simply need to determine a funnel that makes sense for your app.

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4. Prioritize through ROI

Focusing on paying the lowest possible CPI for your users is ill-advised. What matters ultimately is not how much you pay for each user but the delta between how much the user costs (CPI or eCPI) and how much he brings in (LTV). Every channel where your LTV is higher than the initial investment is essentially profitable. It’s better to pay 5$ for a user that brings in an average of 6$ than to pay 0.10$ for an install that will yield no revenue.

5. Calculate your eCPI

If you are in growth mode, then you shouldn’t base your ROI calculations and spending decisions on the difference between revenue per user and CPI, but rather use eCPI for the calculation.

The eCPI is the effective cost per install and factors in organic installs obtained through social sharing. Your app has a k-factor, which is its virality ratio. If your k-factor is X, then it means that for every user you acquire for your app, you organically get an average of X extra users. Calculation of eCPI is obtained by extrapolating the total numbers of users acquired through a campaign, tallying up both acquired users and organics, and then dividing that total by the campaign spend. If you acquire a sufficient amount of users in a single country to reach a top-10 overall chart position in the App Stores, then the organic installs of your app through this extra exposure must also be accounted into your eCPI calculations.

Since eCPI is naturally always lower than CPI, this methodology allows for more aggressiveness on the market, as the profitability threshold you are using is also lower.

6. Measure the Right Scale

Once you know where to get the best users with the best return on investment, you will want to increase spend on these traffic sources, or what we call in the jargon “double down.” But remember to act moderately when you scale up. Every traffic source, no matter how large, will eventually saturate. If you increase the spending too rapidly and too radically, you might hit that point of saturation, which subsequently drives your CPI up while reducing the quality of users. Test and fine-tune until you find the maximum of daily installs you can get at the best ROI ratio for each traffic source, and then continue to recalibrate.

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Each app is different in its approach to acquiring users as UA involves a myriad of variables with many different options to consider. There is no one correct answer, however determining a UA budget and allocating it appropriately is crucial early on in your app’s development process. Each user will cost you something, and you must determine both how much you’re willing to spend as well as how to best optimize your spending to acquire the right users.